Document and Entity Information
Document and Entity Information | 6 Months Ended |
Jun. 30, 2017shares | |
Document and Entity Information [Abstract] | |
Entity Registrant Name | 3M Company |
Trading Symbol | mmm |
Entity Central Index Key | 66,740 |
Document Type | 10-Q |
Document Period End Date | Jun. 30, 2017 |
Amendment Flag | false |
Current Fiscal Year End Date | --12-31 |
Entity Current Reporting Status | Yes |
Entity Filer Category | Large Accelerated Filer |
Entity Common Stock, Shares Outstanding | 596,767,147 |
Document Fiscal Year Focus | 2,017 |
Document Fiscal Period Focus | Q2 |
Consolidated Statement of Incom
Consolidated Statement of Income - USD ($) shares in Millions, $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Consolidated Statement of Income | ||||
Net sales | $ 7,810 | $ 7,662 | $ 15,495 | $ 15,071 |
Operating expenses | ||||
Cost of sales | 4,007 | 3,799 | 7,876 | 7,477 |
Selling, general and administrative expenses | 1,607 | 1,560 | 3,207 | 3,093 |
Research, development and related expenses | 473 | 437 | 944 | 887 |
Gain on sale of businesses | (461) | (490) | (40) | |
Total operating expenses | 5,626 | 5,796 | 11,537 | 11,417 |
Operating income | 2,184 | 1,866 | 3,958 | 3,654 |
Interest expense and income | ||||
Interest expense | 54 | 38 | 99 | 85 |
Interest income | (12) | (7) | (20) | (12) |
Total interest expense - net | 42 | 31 | 79 | 73 |
Income before income taxes | 2,142 | 1,835 | 3,879 | 3,581 |
Provision for income taxes | 557 | 542 | 968 | 1,010 |
Net income including noncontrolling interest | 1,585 | 1,293 | 2,911 | 2,571 |
Less: Net income attributable to noncontrolling interest | 2 | 2 | 5 | 5 |
Net income attributable to 3M | $ 1,583 | $ 1,291 | $ 2,906 | $ 2,566 |
Weighted average 3M common shares outstanding - basic (in shares) | 598.1 | 606.9 | 598.1 | 607.2 |
Earnings per share attributable to 3M common shareholders - basic (in dollars per share) | $ 2.65 | $ 2.13 | $ 4.86 | $ 4.23 |
Weighted average 3M common shares outstanding - diluted (in shares) | 612.8 | 620.9 | 612.4 | 621.1 |
Earnings per share attributable to 3M common shareholders - diluted (in dollars per share) | $ 2.58 | $ 2.08 | $ 4.74 | $ 4.13 |
Cash dividends paid per 3M common share (in dollars per share) | $ 1.175 | $ 1.11 | $ 2.35 | $ 2.22 |
Consolidated Statement of Compr
Consolidated Statement of Comprehensive Income - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Consolidated Statement of Comprehensive Income | ||||
Net income including noncontrolling interest | $ 1,585 | $ 1,293 | $ 2,911 | $ 2,571 |
Other comprehensive income (loss), net of tax: | ||||
Cumulative translation adjustment | (67) | 37 | 225 | 175 |
Defined benefit pension and postretirement plans adjustment | 78 | 67 | 161 | 136 |
Cash flow hedging instruments - unrealized gain (loss) | (51) | (27) | (127) | (137) |
Total other comprehensive income (loss), net of tax | (40) | 77 | 259 | 174 |
Comprehensive income (loss) including noncontrolling interest | 1,545 | 1,370 | 3,170 | 2,745 |
Comprehensive (income) loss attributable to noncontrolling interest | (2) | (2) | (8) | (4) |
Comprehensive income (loss) attributable to 3M | $ 1,543 | $ 1,368 | $ 3,162 | $ 2,741 |
Consolidated Balance Sheet
Consolidated Balance Sheet - USD ($) $ in Millions | Jun. 30, 2017 | Dec. 31, 2016 |
Current assets | ||
Cash and cash equivalents | $ 2,654 | $ 2,398 |
Marketable securities - current | 140 | 280 |
Accounts receivable - net | 4,919 | 4,392 |
Inventories | ||
Finished goods | 1,863 | 1,629 |
Work in process | 1,145 | 1,039 |
Raw materials and supplies | 830 | 717 |
Total inventories | 3,838 | 3,385 |
Other current assets | 1,090 | 1,271 |
Total current assets | 12,641 | 11,726 |
Marketable securities - non-current | 17 | 17 |
Investments | 137 | 128 |
Property, plant and equipment | 24,292 | 23,499 |
Less: Accumulated depreciation | (15,726) | (14,983) |
Property, plant and equipment - net | 8,566 | 8,516 |
Goodwill | 9,105 | 9,166 |
Intangible assets - net | 2,201 | 2,320 |
Prepaid pension benefits | 83 | 52 |
Other assets | 1,207 | 981 |
Total assets | 33,957 | 32,906 |
Current liabilities | ||
Short-term borrowings and current portion of long-term debt | 213 | 972 |
Accounts payable | 1,782 | 1,798 |
Accrued payroll | 666 | 678 |
Accrued income taxes | 432 | 299 |
Other current liabilities | 2,604 | 2,472 |
Total current liabilities | 5,697 | 6,219 |
Long-term debt | 11,088 | 10,678 |
Pension and postretirement benefits | 3,761 | 4,018 |
Other liabilities | 1,767 | 1,648 |
Total liabilities | 22,313 | 22,563 |
Commitments and contingencies (Note 12) | ||
3M Company shareholders' equity: | ||
Common stock par value, $.01 par value, 944,033,056 shares issued | 9 | 9 |
Additional paid-in capital | 5,244 | 5,061 |
Retained earnings | 38,793 | 37,907 |
Treasury stock, at cost: 347,265,909 shares at June 30, 2017; 347,306,778 shares at December 31, 2016 | (25,466) | (25,434) |
Accumulated other comprehensive income (loss) | (6,989) | (7,245) |
Total 3M Company shareholders' equity | 11,591 | 10,298 |
Noncontrolling interest | 53 | 45 |
Total equity | 11,644 | 10,343 |
Total liabilities and equity | $ 33,957 | $ 32,906 |
Consolidated Balance Sheet (Par
Consolidated Balance Sheet (Parenthetical) - $ / shares | Jun. 30, 2017 | Dec. 31, 2016 |
Consolidated Balance Sheet | ||
Common stock, par value per share (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares issued (in shares) | 944,033,056 | 944,033,056 |
Treasury stock (in shares) | 347,265,909 | 347,306,778 |
Consolidated Statement of Cash
Consolidated Statement of Cash Flows - USD ($) $ in Millions | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Cash Flows from Operating Activities | ||
Net income including noncontrolling interest | $ 2,911 | $ 2,571 |
Adjustments to reconcile net income including noncontrolling interest to net cash provided by operating activities | ||
Depreciation and amortization | 818 | 722 |
Company pension and postretirement contributions | (279) | (97) |
Company pension and postretirement expense | 162 | 118 |
Stock-based compensation expense | 206 | 193 |
Gain on sale of businesses | (490) | (40) |
Deferred income taxes | (120) | (134) |
Changes in assets and liabilities | ||
Accounts receivable | (412) | (419) |
Inventories | (347) | (42) |
Accounts payable | (60) | (57) |
Accrued income taxes (current and long-term) | 257 | (102) |
Other - net | (16) | (168) |
Net cash provided by operating activities | 2,630 | 2,545 |
Cash Flows from Investing Activities | ||
Purchases of property, plant and equipment (PP&E) | (589) | (637) |
Proceeds from sale of PP&E and other assets | 13 | 18 |
Acquisitions, net of cash acquired | (4) | |
Purchases of marketable securities and investments | (407) | (510) |
Proceeds from maturities and sale of marketable securities and investments | 543 | 449 |
Proceeds from sale of businesses | 862 | 56 |
Other - net | 5 | (2) |
Net cash provided by (used in) investing activities | 427 | (630) |
Cash Flows from Financing Activities | ||
Change in short-term debt - net | (113) | (337) |
Repayment of debt (maturities greater than 90 days) | (650) | |
Proceeds from debt (maturities greater than 90 days) | 1,112 | |
Purchases of treasury stock | (1,184) | (2,055) |
Proceeds from issuance of treasury stock pursuant to stock option and benefit plans | 496 | 612 |
Dividends paid to shareholders | (1,403) | (1,344) |
Other - net | (2) | (16) |
Net cash used in financing activities | (2,856) | (2,028) |
Effect of exchange rate changes on cash and cash equivalents | 55 | 3 |
Net increase (decrease) in cash and cash equivalents | 256 | (110) |
Cash and cash equivalents at beginning of year | 2,398 | 1,798 |
Cash and cash equivalents at end of period | $ 2,654 | $ 1,688 |
Significant Accounting Policies
Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2017 | |
Significant Accounting Policies | |
Significant Accounting Policies | 3M Company and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) NOTE 1. Significant Accounting Policies Basis of Presentation The interim consolidated financial statements are unaudited but, in the opinion of management, reflect all adjustments necessary for a fair statement of the Company’s consolidated financial position, results of operations and cash flows for the periods presented. These adjustments consist of normal, recurring items. The results of operations for any interim period are not necessarily indicative of results for the full year. The interim consolidated financial statements and notes are presented as permitted by the requirements for Quarterly Reports on Form 10-Q. As described in 3M’s Current Report on Form 8-K dated May 4, 2017 (which updated 3M’s 2016 Annual Report on Form 10-K) and 3M’s Quarterly Report on Form 10-Q for the period ended March 31, 2017, effective in the first quarter of 2017, the Company changed its business segment reporting in its continuing effort to improve the alignment of businesses around markets and customers. These changes included the integration of the former Renewable Energy Division into existing divisions, the combining of two divisions to form the Automotive and Aerospace Solutions Division, and consolidation of U.S. customer account activity, impacting dual credit reporting. Segment information presented herein reflects the impact of these changes for all periods presented. This Quarterly Report on Form 10-Q should be read in conjunction with the Company’s consolidated financial statements and notes included in its Current Report on Form 8-K dated May 4, 2017. Foreign Currency Translation Local currencies generally are considered the functional currencies outside the United States. Assets and liabilities for operations in local-currency environments are translated at month-end exchange rates of the period reported. Income and expense items are translated at month-end exchange rates of each applicable month. Cumulative translation adjustments are recorded as a component of accumulated other comprehensive income (loss) in shareholders’ equity. 3M has a subsidiary in Venezuela, the financial statements of which are remeasured as if its functional currency were that of its parent because Venezuela’s economic environment is considered highly inflationary. The operating income of this subsidiary represented less than 1.0 percent of 3M’s consolidated operating income for 2016. The Venezuelan government sets official rates of exchange and conditions precedent to purchase foreign currency at these rates with local currency. The government also operates various expanded secondary currency exchange mechanisms that have been eliminated and replaced from time to time. Such rates and conditions have been and continue to be subject to change. For the periods presented, the financial statements of 3M’s Venezuelan subsidiary were remeasured utilizing the rate associated with the secondary auction mechanism, Tipo de Cambio Complementario, which was redesigned by the Venezuelan government in June 2017, (DICOM2), or its predecessor. During the same periods, the Venezuelan government’s official exchange was Tipo de Cambio Protegido (DIPRO), or its predecessor. Note 1 in 3M’s Current Report on Form 8-K dated May 4, 2017 (which updated 3M’s 2016 Annual Report on Form 10-K) provides additional information the Company considers in determining the exchange rate used relative to its Venezuelan subsidiary as well as factors which could lead to its deconsolidation. The Company continues to monitor these circumstances. Changes in applicable exchange rates or exchange mechanisms may continue in the future. These changes could impact the rate of exchange applicable to remeasure the Company’s net monetary assets (liabilities) denominated in Venezuelan Bolivars (VEF). As of June 30, 2017, the Company had a balance of net monetary assets denominated in VEF of less than 5 billion VEF and the DIPRO and DICOM exchange rates were approximately 10 VEF and 2,600 VEF per U.S. dollar, respectively. A need to deconsolidate the Company’s Venezuelan subsidiary’s operations may result from a lack of exchangeability of VEF-denominated cash coupled with an acute degradation in the ability to make key operational decisions due to government regulations in Venezuela. Based upon a review of factors as of June 30, 2017, the Company continues to consolidate its Venezuelan subsidiary. As of June 30, 2017, the balance of intercompany receivables due from this subsidiary and its equity balance were not significant. Reclassifications Certain amounts in prior periods’ consolidated financial statements have been reclassified to conform to the current period presentation. Earnings Per Share The difference in the weighted average 3M shares outstanding for calculating basic and diluted earnings per share attributable to 3M common shareholders is a result of the dilution associated with the Company’s stock-based compensation plans. Certain options outstanding under these stock-based compensation plans were not included in the computation of diluted earnings per share attributable to 3M common shareholders because they would not have had a dilutive effect (insignificant for the three months ended June 30, 2017; 1.6 million average options for the six months ended June 30, 2017; 2.9 million average options for the three months ended June 30, 2016; and 5.9 million average options for the six months ended June 30, 2016). The computations for basic and diluted earnings per share follow: Earnings Per Share Computations Three months ended Six months ended June 30, June 30, (Amounts in millions, except per share amounts) 2017 2016 2017 2016 Numerator: Net income attributable to 3M $ $ $ $ Denominator: Denominator for weighted average 3M common shares outstanding – basic Dilution associated with the Company’s stock-based compensation plans 14.7 14.0 14.3 13.9 Denominator for weighted average 3M common shares outstanding – diluted 612.8 612.4 Earnings per share attributable to 3M common shareholders – basic $ 2.65 $ 2.13 $ 4.86 $ 4.23 Earnings per share attributable to 3M common shareholders – diluted $ 2.58 $ 2.08 $ 4.74 $ 4.13 New Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers , and in August 2015 issued ASU No. 2015-14, which amended the standard as to effective date. The ASU provides a single comprehensive model to be used in the accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The standard’s stated core principle is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle the ASU includes provisions within a five step model that includes identifying the contract with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations, and recognizing revenue when (or as) an entity satisfies a performance obligation. The standard also specifies the accounting for some costs to obtain or fulfill a contract with a customer and requires expanded disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. During 2016, the FASB also issued ASU No. 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net) ; ASU No. 2016-10, Identifying Performance Obligations and Licensing ; ASU No. 2016-12, Narrow-Scope Improvements and Practical Expedients , and ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers which amend ASU No. 2014-09. These amendments include clarification of principal versus agent guidance in situations in which a revenue transaction involves a third party in providing goods or services to a customer. In such circumstances, an entity must determine whether the nature of its promise to the customer is to provide the underlying goods or services (i.e., the entity is the principal in the transaction) or to arrange for the third party to provide the underlying goods or services (i.e., the entity is the agent in the transaction). The amendments clarify, in terms of identifying performance obligations, how entities would determine whether promised goods or services are separately identifiable from other promises in a contract and, therefore, would be accounted for separately. The guidance allows entities to disregard goods or services that are immaterial in the context of a contract and provides an accounting policy election to account for shipping and handling activities as fulfillment costs rather than as additional promised services. With regard to the licensing, the amendments clarify how an entity would evaluate the nature of its promise in granting a license of intellectual property, which determines whether the entity recognizes revenue over time or at a point in time. The amendments also address implementation issues relative to transition (adding a practical expedient for contract modifications and clarifying what constitutes a completed contract when employing full or modified retrospective transition methods), collectability, noncash consideration, and the presentation of sales and other similar-type taxes (allowing entities to exclude sales-type taxes collected from transaction price). Finally, the amendments make certain technical corrections and provide additional guidance in the areas of disclosure of performance obligations, provisions for losses on certain types of contracts, scoping, and other areas. Overall, ASU No. 2014-09, as amended, provides for either full retrospective adoption or a modified retrospective adoption by which it is applied only to the most current period presented. For 3M, the ASU is effective January 1, 2018. The Company is continuing to evaluate the standard’s impact on 3M’s consolidated results of operations and financial condition. 3M has conducted initial analyses, developed project management relative to the process of adopting this ASU, and is currently completing detailed contract reviews to determine necessary adjustments to existing accounting policies and to support an evaluation of the standard’s impact on the Company’s consolidated results of operations and financial condition. For the majority of 3M’s revenue arrangements, no significant impacts are expected as these transactions are not accounted for under industry-specific guidance that will be superseded by the ASU and generally consist of a single performance obligation to transfer promised goods or services. However, in addition to expanded disclosures regarding revenue, the ASU could, for example, impact the timing of revenue recognition in some arrangements for which software industry-specific guidance (which the ASU supersedes) is presently utilized. The Company currently anticipates utilizing the modified retrospective method of adoption on January 1, 2018. In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory , which modified previous requirements regarding measuring inventory at the lower of cost or market. Under previous standards, the market amount required consideration of replacement cost, net realizable value (NRV), and NRV less an approximately normal profit margin. The new ASU replaced market with NRV, defined as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. This eliminated the need to determine and consider replacement cost or NRV less an approximately normal profit margin when measuring inventory. 3M adopted this standard prospectively beginning January 1, 2017. The adoption did not have a material impact on 3M’s consolidated results of operations and financial condition. In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities , which revises the accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. The ASU also amends certain disclosure requirements associated with the fair value of financial instruments. The new guidance requires the fair value measurement of investments in equity securities and other ownership interests in an entity, including investments in partnerships, unincorporated joint ventures and limited liability companies (collectively, equity securities) that do not result in consolidation and are not accounted for under the equity method. Entities will need to measure these investments and recognize changes in fair value in net income. Entities will no longer be able to recognize unrealized holding gains and losses on equity securities they classify under current guidance as available for sale in other comprehensive income (OCI). They also will no longer be able to use the cost method of accounting for equity securities that do not have readily determinable fair values. Instead, for these types of equity investments that do not otherwise qualify for the net asset value practical expedient, entities will be permitted to elect a practicability exception and measure the investment at cost less impairment plus or minus observable price changes (in orderly transactions). The ASU also establishes an incremental recognition and disclosure requirement related to the presentation of fair value changes of financial liabilities for which the fair value option (FVO) has been elected. Under this guidance, an entity would be required to separately present in OCI the portion of the total fair value change attributable to instrument-specific credit risk as opposed to reflecting the entire amount in earnings. For derivative liabilities for which the FVO has been elected, however, any changes in fair value attributable to instrument-specific credit risk would continue to be presented in net income, which is consistent with current guidance. For 3M, this standard is effective beginning January 1, 2018 via a cumulative-effect adjustment to beginning retained earnings, except for guidance relative to equity securities without readily determinable fair values which is applied prospectively. The Company is currently assessing this ASU’s impact on 3M’s consolidated results of operations and financial condition, however, 3M has historically held limited amounts of equity securities and cost method investments (less than $75 million in aggregate at June 30, 2017), and has not elected the FVO with respect to material financial liabilities. In February 2016, the FASB issued ASU No. 2016-02, Leases , replacing existing lease accounting guidance. The new standard introduces a lessee model that would require entities to recognize assets and liabilities for most leases, but recognize expenses on their income statements in a manner similar to current accounting. The ASU does not make fundamental changes to existing lessor accounting. However, it modifies what qualifies as a sales-type and direct financing lease and related accounting and aligns a number of the underlying principles with those of the new revenue standard, ASU No. 2014-09, such as evaluating how collectability should be considered and determining when profit can be recognized. The guidance eliminates existing real estate-specific provisions and requires expanded qualitative and quantitative disclosures. The standard requires modified retrospective transition by which it is applied at the beginning of the earliest comparative period presented in the year of adoption. For 3M, the ASU is effective January 1, 2019. Information under existing lease guidance with respect to rent expense for operating leases and the Company’s minimum lease payments for capital and operating leases with non-cancelable terms in excess of one year as of December 31, 2016 is included in Note 14 in 3M’s Current Report on Form 8-K dated May 4, 2017 (which updated 3M’s 2016 Annual Report on Form 10-K). The Company is currently assessing this ASU’s impact on 3M’s consolidated results of operations and financial condition. In March 2016, the FASB issued ASU No. 2016-06, Contingent Put and Call Options in Debt Instruments . This ASU clarified guidance used to determine if debt instruments that contain contingent put or call options require separation of the embedded put or call feature from the debt instrument and trigger accounting for the feature as a derivative with changes in fair value recorded through income. Under the new guidance, fewer put or call options embedded in debt instruments require derivative accounting. For 3M, this ASU was effective January 1, 2017. The Company’s outstanding debt with embedded put provisions did not require separate derivative accounting under previous guidance. As a result, the adoption of this standard did not have a material impact on the Company’s consolidated results of operations and financial condition. In March 2016, the FASB issued ASU No. 2016-07, Simplifying the Transition to the Equity Method of Accounting , which eliminated the previous requirement to apply the equity method of accounting retrospectively (revising prior periods as if the equity method had always been applied) when an entity obtained significant influence over a previously held investment. The new guidance requires the investor to apply the equity method prospectively from the date the investment qualifies for the equity method. The investor would add the carrying value of the existing investment to the cost of any additional investment to determine the initial cost basis of the equity method investment. For 3M, this ASU was effective January 1, 2017 on a prospective basis, with early adoption permitted. 3M will apply this guidance to investments that transition to the equity method after the adoption date. In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments , which revises guidance for the accounting for credit losses on financial instruments within its scope. The new standard introduces an approach, based on expected losses, to estimate credit losses on certain types of financial instruments and modifies the impairment model for available-for-sale debt securities. The new approach to estimating credit losses (referred to as the current expected credit losses model) applies to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt securities, net investments in leases and off-balance-sheet credit exposures. With respect to available-for-sale (AFS) debt securities, the ASU amends the current other-than-temporary impairment model. For such securities with unrealized losses, entities will still consider if a portion of any impairment is related only to credit losses and therefore recognized as a reduction in income. However, rather than also reflecting that credit loss amount as a permanent reduction in cost (amortized cost) basis of that AFS debt security, the ASU requires that credit losses be reflected as an allowance. As a result, under certain circumstances, a recovery in value could result in previous allowances, or portions thereof, reversing back into income. For 3M, this ASU is effective January 1, 2020, with early adoption permitted. Entities are required to apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company is currently assessing this ASU’s impact on 3M’s consolidated results of operations and financial condition. In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments, which was intended to reduce diversity in practice in how certain cash receipts and payments are presented and classified in the statement of cash flows. The standard provided guidance in a number of situations including, among others, settlement of zero-coupon bonds, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, and distributions received from equity method investees. The ASU also provided guidance for classifying cash receipts and payments that have aspects of more than one class of cash flows. For 3M, this ASU is effective January 1, 2018, with early adoption permitted. The Company early adopted ASU No. 2016-15 as of January 1, 2017. Since the associated changes in classification were immaterial to all prior periods presented, no impact was reflected in the Company’s pre-2017 consolidated results of operations and financial condition presented. In October 2016, the FASB issued ASU No. 2016-16, Intra-Entity Transfers of Assets Other Than Inventory , which modifies existing guidance and is intended to reduce diversity in practice with respect to the accounting for the income tax consequences of intra-entity transfers of assets. The ASU indicates that the current exception to income tax accounting that requires companies to defer the income tax effects of certain intercompany transactions would apply only to intercompany inventory transactions. That is, the exception would no longer apply to intercompany sales and transfers of other assets (e.g., intangible assets). Under the existing exception, income tax expense associated with intra-entity profits in an intercompany sale or transfer of assets is eliminated from earnings. Instead, that cost is deferred and recorded on the balance sheet (e.g., as a prepaid asset) until the assets leave the consolidated group. Similarly, the entity is prohibited from recognizing deferred tax assets for the increases in tax bases due to the intercompany sale or transfer. For 3M, this ASU is effective January 1, 2018, with early adoption permitted as of January 1, 2017. The standard requires modified retrospective transition with a cumulative catch-up adjustment to opening retained earnings in the period of adoption. Upon adoption, a company would write off any income tax effects that had been deferred from past intercompany transactions involving non-inventory assets to opening retained earnings. In addition, an entity would record deferred tax assets with an offset to opening retained earnings for amounts that entity had previously not recognized under existing guidance but would recognize under the new guidance. While 3M could initiate additional relevant transactions prior to this ASU’s adoption date, based on deferred tax amounts related to applicable past intercompany transactions as of December 31, 2016, the Company does not expect this ASU to have a material impact on 3M’s consolidated results of operations and financial condition. In October 2016, the FASB issued ASU No. 2016-17, Interests Held through Related Parties That Are under Common Control , which modified previous guidance with respect to how a decision maker that holds an indirect interest in a variable interest entity (VIE) through a common control party determines whether it is the primary beneficiary of the VIE as part of the analysis of whether the VIE would need to be consolidated. Under the ASU, a decision maker would need to consider only its proportionate indirect interest in the VIE held through a common control party. Previous guidance had required the decision maker to treat the common control party’s interest in the VIE as if the decision maker held the interest itself. As a result of the ASU, in certain cases, previous consolidation conclusions may change. For 3M, the standard was effective January 1, 2017 with retrospective application to January 1, 2016. 3M does not have significant involvement with entities subject to consolidation considerations impacted by VIE model factors. As a result, the adoption of this ASU did not have a material impact on the Company’s consolidated results of operations and financial condition. In November 2016, the FASB issued ASU No. 2016-18, Restricted Cash , which clarified guidance on the classification and presentation of restricted cash in the statement of cash flows. Under the ASU, changes in restricted cash and restricted cash equivalents would be included along with those of cash and cash equivalents in the statement of cash flows. As a result, entities would no longer present transfers between cash/equivalents and restricted cash/equivalents in the statement of cash flows. In addition, a reconciliation between the balance sheet and the statement of cash flows would be disclosed when the balance sheet includes more than one line item for cash/equivalents and restricted cash/equivalents. For 3M, this ASU is effective January 1, 2018, with early adoption permitted. The Company early adopted ASU No. 2016-18 as of January 1, 2017. Due to the immaterial use of restricted cash and restricted cash equivalents, no impact was reflected in the Company’s pre-2017 consolidated results of operations and financial condition presented. In January 2017, the FASB issued ASU No. 2017-01, Clarifying the Definition of a Business , which narrows the existing definition of a business and provides a framework for evaluating whether a transaction should be accounted for as an acquisition (or disposal) of assets or a business. The ASU requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set of transferred assets and activities (collectively, the set) is not a business. To be considered a business, the set would need to include an input and a substantive process that together significantly contribute to the ability to create outputs. The standard also narrows the definition of outputs. The definition of a business affects areas of accounting such as acquisitions, disposals and goodwill. Under the new guidance, fewer acquired sets are expected to be considered businesses. For 3M, this ASU is effective January 1, 2018 on a prospective basis with early adoption permitted. 3M would apply this guidance to applicable transactions after the adoption date. In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment . Under the new standard, goodwill impairment would be measured as the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying value of goodwill. This ASU eliminates existing guidance that requires an entity to determine goodwill impairment by calculating the implied fair value of goodwill by hypothetically assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. For 3M, this ASU is effective prospectively to impairment tests beginning January 1, 2020, with early adoption permitted. 3M currently plans to apply this ASU in the fourth quarter of 2017 in conjunction with its annual goodwill impairment testing. In February 2017, the FASB issued ASU No. 2017-05, Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets . This ASU addresses scope-related questions that arose after the FASB issued its revenue guidance in ASU No. 2014-09, Revenue from Contracts with Customers . The new standard clarifies the accounting for derecognition of nonfinancial assets and defines what is considered an in substance nonfinancial asset. Nonfinancial assets largely relate to items such as real estate, ships and intellectual property that do not constitute a business. The new ASU impacts entities derecognizing (e.g. selling) nonfinancial assets (or in substance nonfinancial assets), including partial interests therein, when the purchaser is not a customer. Under the new guidance, the seller would apply certain recognition and measurement principles of ASU No. 2014-09, Revenue from Contracts with Customers , even though the purchaser is not a customer. For 3M, this new standard is effective coincident with the Company’s January 1, 2018 adoption of ASU No. 2014-09. The Company is currently assessing this ASU’s impact on 3M’s consolidated results of operations and financial condition. In March 2017, the FASB issued ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost . This ASU changes how employers that sponsor defined benefit pension and/or other postretirement benefit plans present the net periodic benefit cost in the income statement. Under the new standard, only the service cost component of net periodic benefit cost would be included in operating expenses and only the service cost component would be eligible for capitalization into assets such as inventory. All other net periodic benefit costs components (such as interest, expected return on plan assets, prior service cost amortization and actuarial gain/loss amortization) would essentially be reported outside of operating income. For 3M, this ASU is effective January 1, 2018 on a retrospective basis; however, guidance limiting the capitalization to only the service cost component is applied on prospective basis. The components of 3M’s net periodic defined benefit pension and postretirement benefit costs are presented in Note 9. These include components totaling a benefit of $32 million and $54 million for the three months ended June 30, 2017 and 2016, respectively, and $64 million and $106 million for the six months ended June 30, 2017 and 2016, respectively, that would no longer be included within operating expenses and instead would be reported outside of income from operations under the new standard. In March 2017, the FASB issued ASU No. 2017-08 , Premium Amortization on Purchased Callable Debt Securities , which amends the amortization period for certain purchased callable debt securities held at a premium. Under existing standards, entities generally amortize the premium as an adjustment of yield over the contractual life of the instrument. The new guidance shortens the amortization period to the earliest call date for certain callable debt securities that have explicit, noncontingent call features and are callable at a fixed price and preset date. The amendments do not require an accounting change for securities held at a discount. For 3M, this ASU is effective January 1, 2019 with a modified retrospective transition resulting in a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. Early adoption is permitted. 3M’s marketable security portfolio includes very limited instances of callable debt securities held at a premium. As a result, the Company does not expect this ASU to have a material impact on 3M’s consolidated results of operations and financial condition. In May 2017, the FASB issued ASU No. 2017-09 , Scope of Modification Accounting , that clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as a modification. The general model for accounting for modifications of share-based payment awards is to record the incremental value arising from the changes as additional compensation cost. Under the new standard, fewer changes to the terms of an award would require accounting under this modification model. For 3M, this ASU is effective January 1, 2018, with early adoption permitted. Because the Company does not typically make changes to the terms or conditions of its issued share-based payment awards, 3M does not expect this ASU to have a material impact on its consolidated results of operations and financial condition. In May 2017, the FASB issued ASU No. 2017-10, Determining the Customer of the Operation Services , that clarifies how an operating entity determines the customer of the operation services for transactions within the scope of a service concession arrangement. Service concession arrangements are typically agreements between a grantor and an operating entity whereby the operating entity will operate the grantor’s infrastructure (i.e. airports, roadways, bridges, and prisons) for a specified period of time. The operating entity also may be required to |
Acquisitions and Divestitures
Acquisitions and Divestitures | 6 Months Ended |
Jun. 30, 2017 | |
Acquisitions and Divestitures | |
Acquisitions and Divestitures | NOTE 2. Acquisitions and Divestitures Acquisitions: 3M makes acquisitions of certain businesses from time to time that are aligned with its strategic intent with respect to, among other factors, growth markets and adjacent product lines or technologies. There were no business combinations that closed during the six months ended June 30, 2017. In March 2017, 3M announced that it entered into an agreement to acquire Scott Safety, which is headquartered in Monroe, North Carolina, from Johnson Controls for $2.0 billion, subject to closing and other adjustments. Scott Safety is a premier manufacturer of innovative products, including self-contained breathing apparatus systems, gas and flame detection instruments, and other safety devices that complement 3M’s personal safety portfolio. The business had revenues of approximately $570 million in 2016. This transaction is expected to close in the second half of 2017 and will be reflected within the Company’s Safety and Graphics business, subject to customary closing conditions, regulatory approvals, and information or consultation requirements with relevant works councils. Divestitures: 3M may divest certain businesses from time to time based upon reviews of the Company’s portfolio considering, among other items, factors relative to the extent of strategic and technological alignment and optimization of capital deployment, in addition to considering if selling the businesses results in the greatest value creation for the Company and for shareholders. In January 2017, 3M sold the assets of its safety prescription eyewear business, with annual sales of approximately $45 million, to HOYA Vision Care. The Company recorded a pre-tax gain of $29 million in the first quarter of 2017 as a result of this sale, which was reported within the Company’s Safety and Graphics business. In May 2017, 3M completed the related sale or transfer of control, as applicable of its identity management business to Gemalto N.V. This business, with 2016 sales of approximately $205 million, is a leading provider in identity management solutions, including biometric hardware and software that enable identity verification and authentication, as well as secure materials and document readers. In June 2017, 3M also completed the sale of its tolling and automated license/number plate recognition business, with annual sales of approximately $40 million, to Neology, Inc. 3M’s tolling and automated license/number plate recognition business includes RFID readers and tags, automatic vehicle classification systems, lane controller and host software, and back office software and services. It also provides mobile and fixed cameras, software, and services in automated license/number plate recognition. 3M received proceeds of $833 million, or $809 million net of cash sold, and reflected a pre-tax gain of $461 million in the second quarter of 2017 as a result of these two divestitures, which was reported within the Company’s Safety and Graphics business. In June 2017, 3M agreed to sell its electronic monitoring business to an affiliate of Apax Partners, for $200 million, net of cash sold and subject to closing and other adjustments. This business, with annual sales of approximately $95 million, is a provider of electronic monitoring technologies, serving hundreds of correctional and law enforcement agencies around the world. This sale is expected to close in the second half of 2017, subject to customary closing conditions, regulatory approvals and consultation or information requirements with relevant works councils. The Company expects a pre-tax gain of approximately $100 million as a result of this divestiture that will be reported within the Company’s Safety and Graphics business. The aggregate operating income of these four preceding divested businesses was less than $20 million in 2016. The approximate amounts of major assets and liabilities associated with disposal groups classified as held-for-sale as of June 30, 2017 were not significant and, as of December 31, 2016, included the following: December 31, (Millions) 2016 Accounts receivable $ 25 Property, plant and equipment (net) 25 Intangible assets 35 Deferred revenue (other current liabilities) 35 In addition, approximately $50 million and $270 million of goodwill was estimated to be attributable to disposal groups classified as held-for-sale as of June 30, 2017 and December 31, 2016, respectively, based upon relative fair value. The amounts above have not been segregated and are classified within the existing corresponding line items on the Company’s consolidated balance sheet. Refer to Note 2 in 3M’s Current Report on Form 8-K dated May 4, 2017 (which updated 3M’s 2016 Annual Report on Form 10-K) for more information on 3M’s acquisitions and divestitures. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 6 Months Ended |
Jun. 30, 2017 | |
Goodwill and Intangible Assets | |
Goodwill and Intangible Assets | NOTE 3. Goodwill and Intangible Assets There were no acquisitions that closed during the first six month of 2017. The amounts in the “Translation and other” column in the following table primarily relate to changes in foreign currency exchange rates. The goodwill balances by business segment as of December 31, 2016 and June 30, 2017, follow: Goodwill December 31, 2016 Acquisition Divestiture Translation June 30, 2017 (Millions) Balance activity activity and other Balance Industrial $ 2,536 $ — $ — $ 93 $ 2,629 Safety and Graphics 3,324 — (276) 54 3,102 Health Care 1,609 — — 41 1,650 Electronics and Energy 1,489 — — 26 1,515 Consumer 208 — — 1 209 Total Company $ 9,166 $ — $ (276) $ 215 $ 9,105 Accounting standards require that goodwill be tested for impairment annually and between annual tests in certain circumstances such as a change in reporting units or the testing of recoverability of a significant asset group within a reporting unit. At 3M, reporting units generally correspond to a division. As described in Note 14, effective in the first quarter of 2017, the Company changed its business segment reporting in its continuing effort to improve the alignment of its businesses around markets and customers. For any product changes that resulted in reporting unit changes, the Company applied the relative fair value method to determine the impact on goodwill of the associated reporting units. During the first quarter of 2017, the Company completed its assessment of any potential goodwill impairment for reporting units impacted by this new structure and determined that no impairment existed. Acquired Intangible Assets The carrying amount and accumulated amortization of acquired finite-lived intangible assets, in addition to the balance of non-amortizable intangible assets, as of June 30, 2017, and December 31, 2016, follow: June 30, December 31, (Millions) 2017 2016 Customer related intangible assets $ 1,900 $ 1,939 Patents 585 602 Other technology-based intangible assets 475 524 Definite-lived tradenames 392 420 Other amortizable intangible assets 209 211 Total gross carrying amount $ 3,561 $ 3,696 Accumulated amortization — customer related (818) (797) Accumulated amortization — patents (494) (497) Accumulated amortization — other technology based (284) (302) Accumulated amortization — definite-lived tradenames (231) (236) Accumulated amortization — other (173) (173) Total accumulated amortization $ (2,000) $ (2,005) Total finite-lived intangible assets — net $ 1,561 $ 1,691 Non-amortizable intangible assets (primarily tradenames) 640 629 Total intangible assets — net $ 2,201 $ 2,320 Certain tradenames acquired by 3M are not amortized because they have been in existence for over 55 years, have a history of leading-market share positions, have been and are intended to be continuously renewed, and the associated products of which are expected to generate cash flows for 3M for an indefinite period of time. Amortization expense for acquired intangible assets for the three and six months ended June 30, 2017 and 2016 follows: Three months ended Six months ended June 30, June 30, (Millions) 2017 2016 2017 2016 Amortization expense $ 47 $ 66 $ 111 $ 132 Expected amortization expense for acquired amortizable intangible assets recorded as of June 30, 2017: Remainder of After (Millions) 2017 2018 2019 2020 2021 2022 2022 Amortization expense $ 118 $ 190 $ 181 $ 172 $ 160 $ 147 $ 593 The preceding expected amortization expense is an estimate. Actual amounts of amortization expense may differ from estimated amounts due to additional intangible asset acquisitions, changes in foreign currency exchange rates, impairment of intangible assets, accelerated amortization of intangible assets and other events. 3M expenses the costs incurred to renew or extend the term of intangible assets. |
Restructuring Actions and Exit
Restructuring Actions and Exit Activities | 6 Months Ended |
Jun. 30, 2017 | |
Restructuring and Related Activities [Abstract] | |
Restructuring Actions and Exit Activities | NOTE 4. Restructuring Actions 2017 Restructuring Actions: During the second quarter of 2017, management approved and committed to undertake certain restructuring actions primarily focused on portfolio and footprint optimization. These actions affected approximately 1,300 positions worldwide and resulted in a second quarter 2017 pre-tax charge of $99 million. Remaining activities related to restructuring are expected to be completed by the end of 2018. Components of these restructuring charges are summarized by business segment as follows: Second Quarter 2017 (Millions) Employee-Related Industrial $ 39 Safety and Graphics 9 Health Care 2 Electronics and Energy 7 Consumer 36 Corporate and Unallocated 6 Total Expense $ 99 The preceding restructuring charges were recorded in the income statement as follows: (Millions) Second Quarter 2017 Cost of sales 86 Selling, general and administrative expenses 5 Research, development and related expenses 8 Total $ 99 Components of these restructuring actions, follow: (Millions) Employee-Related Expense incurred $ 99 Accrued restructuring action balances as of June 30, 2017 $ 99 2017 Exit Activities: In the first quarter of 2017, the Company recorded net pre-tax charges of $24 million related to exit activities. These charges related to employee reductions, primarily in Western Europe. |
Supplemental Equity and Compreh
Supplemental Equity and Comprehensive Income Information | 6 Months Ended |
Jun. 30, 2017 | |
Supplemental Equity and Comprehensive Income Information | |
Supplemental Equity and Comprehensive Income Information | NOTE 5. Supplemental Equity and Comprehensive Income Information Consolidated Statement of Changes in Equity Three months ended June 30, 2017 3M Company Shareholders Common Accumulated Stock and Other Additional Comprehensive Non- Paid-in Retained Treasury Income controlling (Millions) Total Capital Earnings Stock (Loss) Interest Balance at March 31, 2017 $ 11,040 $ 5,198 $ 38,094 $ (25,354) $ (6,949) $ 51 Net income 1,585 1,583 2 Other comprehensive income (loss), net of tax: Cumulative translation adjustment (67) (67) — Defined benefit pension and post-retirement plans adjustment 78 78 — Cash flow hedging instruments - unrealized gain (loss) (51) (51) — Total other comprehensive income (loss), net of tax (40) Dividends declared (701) (701) Stock-based compensation 55 55 Reacquired stock (475) (475) Issuances pursuant to stock option and benefit plans 180 (183) 363 Balance at June 30, 2017 $ 11,644 $ 5,253 $ 38,793 $ (25,466) $ (6,989) $ 53 Six months ended June 30, 2017 3M Company Shareholders Common Accumulated Stock and Other Additional Comprehensive Non- Paid-in Retained Treasury Income controlling (Millions) Total Capital Earnings Stock (Loss) Interest Balance at December 31, 2016 $ 10,343 $ 5,070 $ 37,907 $ (25,434) $ (7,245) $ 45 Net income 2,911 2,906 5 Other comprehensive income (loss), net of tax: Cumulative translation adjustment 225 222 3 Defined benefit pension and post-retirement plans adjustment 161 161 — Cash flow hedging instruments - unrealized gain (loss) (127) (127) — Total other comprehensive income (loss), net of tax 259 Dividends declared (1,403) (1,403) Stock-based compensation 183 183 Reacquired stock (1,153) (1,153) Issuances pursuant to stock option and benefit plans 504 (617) 1,121 Balance at June 30, 2017 $ 11,644 $ 5,253 $ 38,793 $ (25,466) $ (6,989) $ 53 Three months ended June 30, 2016 3M Company Shareholders Common Accumulated Stock and Other Additional Comprehensive Non- Paid-in Retained Treasury Income controlling (Millions) Total Capital Earnings Stock (Loss) Interest Balance at March 31, 2016 $ 11,495 $ 4,925 $ 36,506 $ (23,716) $ (6,261) $ 41 Net income 1,293 1,291 2 Other comprehensive income (loss), net of tax: Cumulative translation adjustment 37 37 — Defined benefit pension and post-retirement plans adjustment 67 67 — Cash flow hedging instruments - unrealized gain (loss) (27) (27) — Total other comprehensive income (loss), net of tax 77 Dividends declared (672) (672) Stock-based compensation 47 47 Reacquired stock (837) (837) Issuances pursuant to stock option and benefit plans 255 (210) 465 Balance at June 30, 2016 $ 11,658 $ 4,972 $ 36,915 $ (24,088) $ (6,184) $ 43 Six months ended June 30, 2016 3M Company Shareholders Common Accumulated Stock and Other Additional Comprehensive Non- Paid-in Retained Treasury Income controlling (Millions) Total Capital Earnings Stock (Loss) Interest Balance at December 31, 2015 $ 11,468 $ 4,800 $ 36,296 $ (23,308) $ (6,359) $ 39 Net income 2,571 2,566 5 Other comprehensive income (loss), net of tax: Cumulative translation adjustment 175 176 (1) Defined benefit pension and post-retirement plans adjustment 136 136 — Cash flow hedging instruments - unrealized gain (loss) (137) (137) — Total other comprehensive income (loss), net of tax 174 Dividends declared (1,344) (1,344) Stock-based compensation 172 172 Reacquired stock (2,000) (2,000) Issuances pursuant to stock option and benefit plans 617 (603) 1,220 Balance at June 30, 2016 $ 11,658 $ 4,972 $ 36,915 $ (24,088) $ (6,184) $ 43 Changes in Accumulated Other Comprehensive Income (Loss) Attributable to 3M by Component Three months ended June 30, 2017 Total Defined Benefit Cash Flow Accumulated Pension and Hedging Other Cumulative Postretirement Instruments, Comprehensive Translation Plans Unrealized Income (Millions) Adjustment Adjustment Gain (Loss) (Loss) Balance at March 31, 2017, net of tax: $ (1,719) $ (5,245) $ 15 $ (6,949) Other comprehensive income (loss), before tax: Amounts before reclassifications (167) — (74) (241) Amounts reclassified out — 119 (5) 114 Total other comprehensive income (loss), before tax (167) 119 (79) (127) Tax effect 100 (41) 28 87 Total other comprehensive income (loss), net of tax (67) 78 (51) (40) Balance at June 30, 2017, net of tax: $ (1,786) $ (5,167) $ (36) $ (6,989) Six months ended June 30, 2017 Total Defined Benefit Cash Flow Accumulated Pension and Hedging Other Cumulative Postretirement Instruments, Comprehensive Translation Plans Unrealized Income (Millions) Adjustment Adjustment Gain (Loss) (Loss) Balance at December 31, 2016, net of tax: $ (2,008) $ (5,328) $ 91 $ (7,245) Other comprehensive income (loss), before tax: Amounts before reclassifications 59 — (175) (116) Amounts reclassified out — 238 (23) 215 Total other comprehensive income (loss), before tax 59 238 (198) 99 Tax effect 163 (77) 71 157 Total other comprehensive income (loss), net of tax 222 161 (127) 256 Balance at June 30, 2017, net of tax: $ (1,786) $ (5,167) $ (36) $ (6,989) Three months ended June 30, 2016 Total Defined Benefit Cash Flow Accumulated Pension and Hedging Other Cumulative Postretirement Instruments, Comprehensive Translation Plans Unrealized Income (Millions) Adjustment Adjustment Gain (Loss) (Loss) Balance at March 31, 2016, net of tax: $ (1,540) $ (4,735) $ 14 $ (6,261) Other comprehensive income (loss), before tax: Amounts before reclassifications 59 — (15) 44 Amounts reclassified out — 101 (28) 73 Total other comprehensive income (loss), before tax 59 101 (43) 117 Tax effect (22) (34) 16 (40) Total other comprehensive income (loss), net of tax 37 67 (27) 77 Balance at June 30, 2016, net of tax: $ (1,503) $ (4,668) $ (13) $ (6,184) Six months ended June 30, 2016 Total Defined Benefit Cash Flow Accumulated Pension and Hedging Other Cumulative Postretirement Instruments, Comprehensive Translation Plans Unrealized Income (Millions) Adjustment Adjustment Gain (Loss) (Loss) Balance at December 31, 2015, net of tax: $ (1,679) $ (4,804) $ 124 $ (6,359) Other comprehensive income (loss), before tax: Amounts before reclassifications 119 — (136) (17) Amounts reclassified out — 204 (80) 124 Total other comprehensive income (loss), before tax 119 204 (216) 107 Tax effect 57 (68) 79 68 Total other comprehensive income (loss), net of tax 176 136 (137) 175 Balance at June 30, 2016, net of tax $ (1,503) $ (4,668) $ (13) $ (6,184) Income taxes are not provided for foreign translation relating to permanent investments in international subsidiaries, but tax effects within cumulative translation does include impacts from items such as net investment hedge transactions. Reclassification adjustments are made to avoid double counting in comprehensive income items that are also recorded as part of net income. Reclassifications out of Accumulated Other Comprehensive Income Attributable to 3M Amount Reclassified from Details about Accumulated Other Accumulated Other Comprehensive Income Comprehensive Income Components Three months ended June 30, Six months ended June 30, Location on Income (Millions) 2017 2016 2017 2016 Statement Gains (losses) associated with, defined benefit pension and postretirement plans amortization Transition asset $ — $ 1 $ — $ 1 See Note 9 Prior service benefit 22 24 44 47 See Note 9 Net actuarial loss (141) (126) (282) (252) See Note 9 Total before tax (119) (101) (238) (204) Tax effect 41 34 77 68 Provision for income taxes Net of tax $ (78) $ (67) $ (161) $ (136) Cash flow hedging instruments gains (losses) Foreign currency forward/option contracts $ 5 $ 28 $ 23 $ 81 Cost of sales Interest rate swap contracts — — — (1) Interest expense Total before tax 5 28 23 80 Tax effect (2) (11) (8) (29) Provision for income taxes Net of tax $ 3 $ 17 $ 15 $ 51 Total reclassifications for the period, net of tax $ (75) $ (50) $ (146) $ (85) |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2017 | |
Income Taxes | |
Income Taxes | NOTE 6. Income Taxes The Company files income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2005. The IRS has completed its field examination of the Company’s U.S. federal income tax returns for the years 2005 through 2014. The Company protested certain IRS positions within these tax years and entered into the administrative appeals process with the IRS. In December 2012, the Company received a statutory notice of deficiency for the 2006 year. The Company filed a petition in Tax Court in the first quarter of 2013 relating to the 2006 tax year. Currently, the Company is under examination by the IRS for its U.S. federal income tax returns for the years 2015, 2016, and 2017. It is anticipated that the IRS will complete its examination of the Company for 2015 by the end of the fourth quarter of 2017, for 2016 by the end of the first quarter of 2018, and for 2017 by the end of the first quarter of 2019. As of June 30, 2017, the IRS has not proposed any significant adjustments to the Company’s tax positions for which the Company is not adequately reserved. Payments relating to other proposed assessments arising from the 2005 through 2017 examinations may not be made until a final agreement is reached between the Company and the IRS on such assessments or upon a final resolution resulting from the administrative appeals process or judicial action. In addition to the U.S. federal examination, there is also audit activity in several U.S. state and foreign jurisdictions. 3M anticipates changes to the Company’s uncertain tax positions due to the closing and resolution of audit issues for various audit years mentioned above and closure of statutes. Currently, the Company is estimating a decrease in unrecognized tax benefits during the next 12 months as a result of anticipated resolutions of audit issues. The total amounts of unrecognized tax benefits that, if recognized, would affect the effective tax rate as of June 30, 2017 and December 31, 2016 are $370 million and $333 million, respectively. The Company recognizes interest and penalties accrued related to unrecognized tax benefits in tax expense. The Company recognized in the consolidated statement of income on a gross basis approximately $5 million and $1 million of expense for the three months ended June 30, 2017 and June 30, 2016, respectively, and approximately $8 million of expense and $3 million of benefit for the six months ended June 30, 2017 and June 30, 2016, respectively. At June 30, 2017 and December 31, 2016, accrued interest and penalties in the consolidated balance sheet on a gross basis were $56 million and $52 million, respectively. Included in these interest and penalty amounts are interest and penalties related to tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period. The effective tax rate for the second quarter of 2017 was 26.0 percent, compared to 29.6 percent in the second quarter of 2016, a decrease of 3.6 percentage points. Primary factors that decreased the Company’s effective tax rate on a combined basis by 5.0 percentage points year-on-year included international taxes that were impacted by changes to the geographic mix of income before taxes and prior year cash optimization actions, tax benefits resulting from the held-for-sale status of certain legal entities, and other items. This decrease was partially offset by a 1.4 percentage points year-on-year increase to the Company’s effective tax rate, which reflects a lower year-on-year excess tax benefit related to employee share-based payments, and remeasurements of 3M’s uncertain tax positions. The effective tax rate for the first six months of 2017 was 25.0 percent, compared to 28.2 percent in the first six months of 2016, a decrease of 3.2 percentage points. Primary factors that decreased the Company’s effective tax rate included international taxes that were impacted by changes to the geographic mix of income before taxes and prior year cash optimization actions, tax benefits resulting from the held-for-sale status of certain legal entities, remeasurements of 3M’s uncertain tax positions, an increase in excess tax benefits related to employee share-based payments, and other items. The provision for income taxes is determined using the asset and liability approach. Under this approach, deferred income taxes represent the expected future tax consequences of temporary differences between the carrying amounts and tax basis of assets and liabilities. The Company records a valuation allowance to reduce its deferred tax assets when uncertainty regarding their realizability exits. As of June 30, 2017 and December 31, 2016, the Company had valuation allowances of $57 million and $47 million on its deferred tax assets, respectively. |
Marketable Securities
Marketable Securities | 6 Months Ended |
Jun. 30, 2017 | |
Marketable Securities | |
Marketable Securities | NOTE 7. Marketable Securities The Company invests in asset-backed securities, certificates of deposit/time deposits, commercial paper, and other securities. The following is a summary of amounts recorded on the Consolidated Balance Sheet for marketable securities (current and non-current). June 30, December 31, (Millions) 2017 2016 Corporate debt securities $ 10 $ 10 Commercial paper 37 14 Certificates of deposit/time deposits 53 197 U.S. municipal securities 3 3 Asset-backed securities: Automobile loan related 28 31 Credit card related 9 18 Other — 7 Asset-backed securities total 37 56 Current marketable securities $ 140 $ 280 U.S. municipal securities $ 17 $ 17 Non-current marketable securities $ 17 $ 17 Total marketable securities $ 157 $ 297 Classification of marketable securities as current or non-current is based on the nature of the securities and availability for use in current operations. At June 30, 2017 and December 31, 2016, gross unrealized gains and/or losses (pre-tax) were not material. The gross amounts of the realized gains or losses were not material. Cost of securities sold use the first in, first out (FIFO) method. Since these marketable securities are classified as available-for-sale securities, changes in fair value will flow through other comprehensive income, with amounts reclassified out of other comprehensive income into earnings upon sale or “other-than-temporary” impairment. 3M reviews impairments associated with its marketable securities in accordance with the measurement guidance provided by ASC 320, Investments-Debt and Equity Securities , when determining the classification of the impairment as “temporary” or “other-than-temporary”. A temporary impairment charge results in an unrealized loss being recorded in the other comprehensive income component of shareholders’ equity. Such an unrealized loss does not reduce net income attributable to 3M for the applicable accounting period because the loss is not viewed as other-than-temporary. The factors evaluated to differentiate between temporary and other-than-temporary include the projected future cash flows, credit ratings actions, and assessment of the credit quality of the underlying collateral, as well as other factors. The balances at June 30, 2017 for marketable securities by contractual maturity are shown below. Actual maturities may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties. (Millions) June 30, 2017 Due in one year or less $ 104 Due after one year through five years 49 Due after five years through ten years 4 Total marketable securities $ 157 3M has a diversified marketable securities portfolio. Within this portfolio, asset-backed securities primarily include interests in automobile loans, credit cards and other asset-backed securities. 3M’s investment policy allows investments in asset-backed securities with minimum credit ratings of Aa2 by Moody’s Investors Service or AA by Standard & Poor’s or Fitch Ratings or DBRS. Asset-backed securities must be rated by at least two of the aforementioned rating agencies, one of which must be Moody’s Investors Service or Standard & Poor’s. At June 30, 2017, all asset-backed security investments were in compliance with this policy. Approximately 76.8 percent of all asset-backed security investments were rated AAA or A-1+ by Standard & Poor’s and/or Aaa or P-1 by Moody’s Investors Service and/or AAA or F1+ by Fitch Ratings. Interest rate risk and credit risk related to the underlying collateral may impact the value of investments in asset-backed securities, while factors such as general conditions in the overall credit market and the nature of the underlying collateral may affect the liquidity of investments in asset-backed securities. 3M does not currently expect risk related to its holding in asset-backed securities to materially impact its financial condition or liquidity. |
Long-Term Debt and Short-Term B
Long-Term Debt and Short-Term Borrowings | 6 Months Ended |
Jun. 30, 2017 | |
Long-Term Debt and Short-Term Borrowings | |
Long-Term Debt and Short-Term Borrowings | NOTE 8. Long-Term Debt and Short-Term Borrowings In June 2017, 3M repaid $650 million aggregate principal amount of fixed rate medium-term notes. |
Pension and Postretirement Bene
Pension and Postretirement Benefit Plans | 6 Months Ended |
Jun. 30, 2017 | |
Pension and Postretirement Benefit Plans | |
Pension and Postretirement Benefit Plans | NOTE 9. Pension and Postretirement Benefit Plans Net periodic benefit cost is recorded in cost of sales, selling, general and administrative expenses, and research, development and related expenses. Components of net periodic benefit cost and other supplemental information for the three and six months ended June 30, 2017 and 2016 follow: Benefit Plan Information Three months ended June 30, Qualified and Non-qualified Pension Benefits Postretirement United States International Benefits (Millions) 2017 2016 2017 2016 2017 2016 Net periodic benefit cost (benefit) Service cost $ 67 $ 65 $ 34 $ 34 $ 12 $ 14 Interest cost 142 144 37 43 20 19 Expected return on plan assets (259) (261) (70) (78) (21) (22) Amortization of transition (asset) obligation — — — (1) — — Amortization of prior service cost (benefit) (6) (6) (3) (4) (13) (14) Amortization of net actuarial (gain) loss 97 88 30 23 14 15 Settlements, curtailments, special termination benefits and other — — — — — — Net periodic benefit cost (benefit) after settlements, curtailments, special termination benefits and other $ 41 $ 30 $ 28 $ 17 $ 12 $ 12 Six months ended June 30, Qualified and Non-qualified Pension Benefits Postretirement United States International Benefits (Millions) 2017 2016 2017 2016 2017 2016 Net periodic benefit cost (benefit) Service cost $ 134 $ 130 $ 67 $ 67 $ 25 $ 27 Interest cost 284 287 74 86 39 39 Expected return on plan assets (518) (521) (139) (156) (42) (45) Amortization of transition (asset) obligation — — — (1) — — Amortization of prior service cost (benefit) (12) (12) (6) (7) (26) (28) Amortization of net actuarial (gain) loss 194 176 60 45 28 31 Settlements, curtailments, special termination benefits and other — — — — — — Net periodic benefit cost (benefit) after settlements, curtailments, special termination benefits and other $ 82 $ 60 $ 56 $ 34 $ 24 $ 24 For the six months ended June 30, 2017, contributions totaling $277 million were made to the Company’s U.S. and international pension plans and $2 million to its postretirement plans. For total year 2017, the Company expects to contribute approximately $300 million to $500 million of cash to its global defined benefit pension and postretirement plans. The Company does not have a required minimum cash pension contribution obligation for its U.S. plans in 2017. Future contributions will depend on market conditions, interest rates and other factors. 3M’s annual measurement date for pension and postretirement assets and liabilities is December 31 each year, which is also the date used for the related annual measurement assumptions. 3M was informed in 2009, that the general partners of WG Trading Company, in which 3M’s benefit plans hold limited partnership interests, are the subject of a criminal investigation as well as civil proceedings by the SEC and CFTC (Commodity Futures Trading Commission). In March 2011, over the objections of 3M and six other limited partners of WG Trading Company, the district court judge ruled in favor of the court appointed receiver’s proposed distribution plan (and in April 2013, the United States Court of Appeals for the Second Circuit affirmed the district court’s ruling). The benefit plan trustee holdings of WG Trading Company interests were adjusted to reflect the decreased estimated fair market value, inclusive of estimated insurance proceeds, as of the annual measurement dates. In the first quarter of 2014, 3M and certain 3M benefit plans filed a lawsuit in the U.S. District Court for the District of Minnesota against five insurers seeking insurance coverage for the WG Trading Company claim. In September 2015, the court ruled in favor of the defendant insurance companies on a motion for summary judgment and dismissed the lawsuit. In October 2015, 3M and the 3M benefit plans filed a notice of appeal to the United States Court of Appeals for the Eighth Circuit. In May 2017, the appellate court affirmed the lower court’s decision. The decision will reduce U.S. pension and postretirement plan assets by $73 million at the December 31, 2017 measurement date and will not have a material adverse effect on the consolidated financial position of the Company. As part of a diversified investment strategy, the U.S. pension and postretirement benefit plans made investments in the natural gas fired power generation industry during the period 2011 through 2013. In April 2017, one of these entities, Panda Temple Power, LLC, filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware. This investment represented less than one percent of the fair value of the U.S. pension and postretirement plans’ assets as of their 2016 measurement date. |
Derivatives
Derivatives | 6 Months Ended |
Jun. 30, 2017 | |
Derivatives | |
Derivatives | NOTE 10. Derivatives The Company uses interest rate swaps, currency swaps, commodity price swaps, and forward and option contracts to manage risks generally associated with foreign exchange rate, interest rate and commodity price fluctuations. The information that follows explains the various types of derivatives and financial instruments used by 3M, how and why 3M uses such instruments, how such instruments are accounted for, and how such instruments impact 3M’s financial position and performance. Additional information with respect to the impacts on other comprehensive income of nonderivative hedging and derivative instruments is included in Note 5. Additional information with respect to the fair value of derivative instruments is included in Note 11. References to information regarding derivatives and/or hedging instruments associated with the Company’s long-term debt are also made in Note 10 in 3M’s Current Report on Form 8-K dated May 4, 2017 (which updated 3M’s 2016 Annual Report on Form 10-K). Types of Derivatives/Hedging Instruments and Inclusion in Income/Other Comprehensive Income Cash Flow Hedges: For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income and reclassified into earnings in the same period during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. Cash Flow Hedging - Foreign Currency Forward and Option Contracts: The Company enters into foreign exchange forward and option contracts to hedge against the effect of exchange rate fluctuations on cash flows denominated in foreign currencies. These transactions are designated as cash flow hedges. The settlement or extension of these derivatives will result in reclassifications (from accumulated other comprehensive income) to earnings in the period during which the hedged transactions affect earnings. 3M may dedesignate these cash flow hedge relationships in advance of the occurrence of the forecasted transaction. The portion of gains or losses on the derivative instrument previously accumulated in other comprehensive income for dedesignated hedges remains in accumulated other comprehensive income until the forecasted transaction occurs or is no longer probable of occurring. Changes in the value of derivative instruments after dedesignation are recorded in earnings and are included in the Derivatives Not Designated as Hedging Instruments section below. The maximum length of time over which 3M hedges its exposure to the variability in future cash flows of the forecasted transactions is 36 months. Cash Flow Hedging — Interest Rate Contracts: The Company may use forward starting interest rate contracts to hedge exposure to variability in cash flows from interest payments on forecasted debt issuances. The amortization of gains and losses on forward starting interest rate swaps is included in the tables below as part of the gain/(loss) recognized in income on the effective portion of derivatives as a result of reclassification from accumulated other comprehensive income. Additional information regarding previously issued and terminated interest rate contracts can be found in Note 12 in 3M’s Current Report on Form 8-K dated May 4, 2017 (which updated 3M’s 2016 Annual Report on Form 10-K). In the first six months of 2016, the Company entered into forward starting interest rate swaps that expired in December 2016 with an aggregate notional amount of $300 million as a hedge against interest rate volatility associated with a forecasted issuance of fixed rate debt. Upon issuance of medium-term notes in September 2016, 3M terminated these interest rate swaps. The termination resulted in an immaterial loss within accumulated other comprehensive income that will be amortized over the respective lives of the debt. In the fourth quarter of 2016, the Company entered into forward starting interest rate swaps with a notional amount of $200 million as a hedge against interest rate volatility associated with a forecasted issuance of fixed rate debt. In the first quarter of 2017, the Company entered into forward starting interest rate swaps with a notional amount of $200 million as a hedge against interest rate volatility associated with a forecasted issuance of fixed rate debt. In the second quarter of 2017, the Company entered into forward starting interest rate swaps with a notional amount of $200 million as a hedge against interest rate volatility associated with a forecasted issuance of fixed rate debt. As of June 30, 2017, the Company had a balance of $36 million associated with the after-tax net unrealized loss associated with cash flow hedging instruments recorded in accumulated other comprehensive income. This includes a remaining balance of $5 million (after tax loss) related to the forward starting interest rate swaps, which will be amortized over the respective lives of the debt. Based on exchange rates as of June 30, 2017, 3M expects to reclassify approximately $1 million of the after-tax net unrealized foreign exchange cash flow hedging losses to earnings over the remainder of 2017, approximately $18 million of the after-tax net unrealized foreign exchange cash flow hedging losses to earnings in 2018, and approximately $17 million of the after-tax net unrealized foreign exchange cash flow hedging losses to earnings after 2018 (with the impact offset by earnings/losses from underlying hedged items). 3M expects to reclassify approximately $16 million of the after-tax net unrealized foreign exchange cash flow hedging losses to earnings over the next 12 months. The location in the consolidated statements of income and comprehensive income and amounts of gains and losses related to derivative instruments designated as cash flow hedges are provided in the following table. Pretax Gain (Loss) Recognized in Pretax Gain (Loss) Income on Effective Portion of Ineffective Portion of Gain Recognized in Other Derivative as a Result of (Loss) on Derivative and Comprehensive Reclassification from Amount Excluded from Income on Effective Accumulated Other Effectiveness Testing Three months ended June 30, 2017 Portion of Derivative Comprehensive Income Recognized in Income (Millions) Amount Location Amount Location Amount Foreign currency forward/option contracts $ (72) Cost of sales $ 5 Cost of sales $ — Interest rate swap contracts (2) Interest expense — Interest expense — Total $ (74) $ 5 $ — Six months ended June 30, 2017 Portion of Derivative Comprehensive Income Recognized in Income (Millions) Amount Location Amount Location Amount Foreign currency forward/option contracts $ (172) Cost of sales $ 23 Cost of sales $ — Interest rate swap contracts (3) Interest expense — Interest expense — Total $ (175) $ 23 $ — Three months ended June 30, 2016 Portion of Derivative Comprehensive Income Recognized in Income (Millions) Amount Location Amount Location Amount Foreign currency forward/option contracts $ (11) Cost of sales $ 28 Cost of sales $ — Interest rate swap contracts (4) Interest expense — Interest expense — Total $ (15) $ 28 $ — Six months ended June 30, 2016 Portion of Derivative Comprehensive Income Recognized in Income (Millions) Amount Location Amount Location Amount Foreign currency forward/option contracts $ (131) Cost of sales $ 81 Cost of sales $ — Interest rate swap contracts (5) Interest expense (1) Interest expense — Total $ (136) $ 80 $ — Fair Value Hedges: For derivative instruments that are designated and qualify as fair value hedges, the gain or loss on the derivatives as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in current earnings. Fair Value Hedging - Interest Rate Swaps: The Company manages interest expense using a mix of fixed and floating rate debt. To help manage borrowing costs, the Company may enter into interest rate swaps. Under these arrangements, the Company agrees to exchange, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional principal amount. The mark-to-market of these fair value hedges is recorded as gains or losses in interest expense and is offset by the gain or loss of the underlying debt instrument, which also is recorded in interest expense. These fair value hedges are highly effective and, thus, there is no impact on earnings due to hedge ineffectiveness. Additional information regarding designated interest rate swaps can be found in Note 12 in 3M’s Current Report on Form 8-K dated May 4, 2017 (which updated 3M’s 2016 Annual Report on Form 10-K). The location in the consolidated statements of income and amounts of gains and losses related to derivative instruments designated as fair value hedges and similar information relative to the hedged items are as follows: Gain (Loss) on Derivative Gain (Loss) on Hedged Item Three months ended June 30, 2017 Recognized in Income Recognized in Income (Millions) Location Amount Location Amount Interest rate swap contracts Interest expense $ 1 Interest expense $ (1) Total $ 1 $ (1) Six months ended June 30, 2017 (Millions) Location Amount Location Amount Interest rate swap contracts Interest expense $ (4) Interest expense $ 4 Total $ (4) $ 4 Three months ended June 30, 2016 (Millions) Location Amount Location Amount Interest rate swap contracts Interest expense $ 5 Interest expense $ (5) Total $ 5 $ (5) Six months ended June 30, 2016 (Millions) Location Amount Location Amount Interest rate swap contracts Interest expense $ 34 Interest expense $ (34) Total $ 34 $ (34) Net Investment Hedges: The Company may use non-derivative (foreign currency denominated debt) and derivative (foreign exchange forward contracts) instruments to hedge portions of the Company’s investment in foreign subsidiaries and manage foreign exchange risk. For instruments that are designated and qualify as hedges of net investments in foreign operations and that meet the effectiveness requirements, the net gains or losses attributable to changes in spot exchange rates are recorded in cumulative translation within other comprehensive income. The remainder of the change in value of such instruments is recorded in earnings. Recognition in earnings of amounts previously recorded in cumulative translation is limited to circumstances such as complete or substantially complete liquidation of the net investment in the hedged foreign operation. To the extent foreign currency denominated debt is not designated in or is dedesignated from a net investment hedge relationship, changes in value of that portion of foreign currency denominated debt due to exchange rate changes are recorded in earnings through their maturity date. 3M’s use of foreign exchange forward contracts designated in hedges of the Company’s net investment in foreign subsidiaries can vary by time period depending on when foreign currency denominated debt balances designated in such relationships are dedesignated, matured, or are newly issued and designated. Additionally, variation can occur in connection with the extent of the Company’s desired foreign exchange risk coverage. At June 30, 2017, the total notional amount of foreign exchange forward contracts designated in net investment hedges was approximately 250 million Euros and approximately 248 billion South Korean Won, along with a principal amount of long-term debt instruments designated in net investment hedges totaling 4.4 billion Euros. The maturity dates of these derivative and nonderivative instruments designated in net investment hedges range from 2017 to 2031. The location in the consolidated statements of income and comprehensive income and amounts of gains and losses related to derivative and nonderivative instruments designated as net investment hedges are as follows. There were no reclassifications of the effective portion of net investment hedges out of accumulated other comprehensive income into income for the periods presented in the table below. Pretax Gain (Loss) Recognized as Cumulative Translation within Other Ineffective Portion of Gain (Loss) on Comprehensive Income Instrument and Amount Excluded on Effective Portion of from Effectiveness Testing Three months ended June 30, 2017 Instrument Recognized in Income (Millions) Amount Location Amount Foreign currency denominated debt $ (270) N/A $ — Foreign currency forward contracts (7) Cost of sales 3 Total $ (277) $ 3 Six months ended June 30, 2017 Comprehensive Income Instrument and Amount Excluded (Millions) Amount Location Amount Foreign currency denominated debt $ (391) N/A $ — Foreign currency forward contracts (27) Cost of sales 5 Total $ (418) $ 5 Three months ended June 30, 2016 Comprehensive Income Instrument and Amount Excluded (Millions) Amount Location Amount Foreign currency denominated debt $ 94 N/A $ — Foreign currency forward contracts 16 Cost of sales 3 Total $ 110 $ 3 Six months ended June 30, 2016 Comprehensive Income Instrument and Amount Excluded (Millions) Amount Location Amount Foreign currency denominated debt $ (50) N/A $ — Foreign currency forward contracts (27) Cost of sales 1 Total $ (77) $ 1 Derivatives Not Designated as Hedging Instruments: 3M enters into foreign exchange forward contracts that are not designated in hedge relationships to offset, in part, the impacts of certain intercompany transactions and to further mitigate short-term currency impacts. In addition, the Company enters into commodity price swaps to offset, in part, fluctuations in costs associated with the use of certain precious metals. These derivative instruments are not designated in hedging relationships; therefore, fair value gains and losses on these contracts are recorded in earnings. The Company does not hold or issue derivative financial instruments for trading purposes. The Company revised amounts previously presented in the table below for the gain (loss) on derivatives recognized in income for the three and six months ended June 30, 2016 relative to foreign currency forward contracts. This immaterial correction increased the previously presented amount of the gain recognized in income in the disclosure table below by $40 million for the three months ended June 30, 2016 and decreased the previously presented amount of the gain recognized in income by $18 million for the six months ended June 30, 2016. This revision had no impact on the Company’s consolidated results of operations, financial condition, or cash flows. The location in the consolidated statements of income and amounts of gains and losses related to derivative instruments not designated as hedging instruments are as follows: Three months ended June 30, 2017 Six months ended June 30, 2017 Gain (Loss) on Derivative Recognized in Gain (Loss) on Derivative Recognized in Income Income (Millions) Location Amount Location Amount Foreign currency forward/option contracts Cost of sales $ 6 Cost of sales $ 5 Foreign currency forward contracts Interest expense (138) Interest expense (96) Total $ (132) $ (91) Three months ended June 30, 2016 Six months ended June 30, 2016 Gain (Loss) on Derivative Recognized in Gain (Loss) on Derivative Recognized in Income Income (Millions) Location Amount Location Amount Foreign currency forward/option contracts Cost of sales $ (1) Cost of sales $ (6) Foreign currency forward contracts Interest expense 89 Interest expense 24 Total $ 88 $ 18 Location and Fair Value Amount of Derivative Instruments The following tables summarize the fair value of 3M’s derivative instruments, excluding nonderivative instruments used as hedging instruments, and their location in the consolidated balance sheet. Notional amounts below are presented at period end foreign exchange rates, except interest rate swaps, which are presented using the contract inception date’s foreign exchange rate. Additional information with respect to the fair value of derivative instruments is included in Note 11. Gross Assets Liabilities June 30, 2017 Notional Fair Fair (Millions) Amount Location Value Amount Location Value Amount Derivatives designated as hedging instruments Foreign currency forward/option contracts $ 2,208 Other current assets $ 11 Other current liabilities $ 42 Foreign currency forward/option contracts 1,488 Other assets 32 Other liabilities 27 Interest rate swap contracts 590 Other current assets 2 Other current liabilities 4 Interest rate swap contracts 1,753 Other assets 22 Other liabilities 2 Total derivatives designated as hedging instruments $ 67 $ 75 Derivatives not designated as hedging instruments Foreign currency forward/option contracts $ 5,914 Other current assets $ 23 Other current liabilities $ 118 Total derivatives not designated as hedging instruments $ 23 $ 118 Total derivative instruments $ 90 $ 193 Gross Assets Liabilities December 31, 2016 Notional Fair Fair (Millions) Amount Location Value Amount Location Value Amount Derivatives designated as hedging instruments Foreign currency forward/option contracts $ 2,160 Other current assets $ 107 Other current liabilities $ 9 Foreign currency forward/option contracts 1,459 Other assets 86 Other liabilities 3 Interest rate swap contracts 1,953 Other assets 25 Other current liabilities 1 Total derivatives designated as hedging instruments $ 218 $ 13 Derivatives not designated as hedging instruments Foreign currency forward/option contracts $ 5,655 Other current assets $ 41 Other current liabilities $ 82 Total derivatives not designated as hedging instruments $ 41 $ 82 Total derivative instruments $ 259 $ 95 Credit Risk and Offsetting of Assets and Liabilities of Derivative Instruments The Company is exposed to credit loss in the event of nonperformance by counterparties in interest rate swaps, currency swaps, commodity price swaps, and forward and option contracts. However, the Company’s risk is limited to the fair value of the instruments. The Company actively monitors its exposure to credit risk through the use of credit approvals and credit limits, and by selecting major international banks and financial institutions as counterparties. 3M enters into master netting arrangements with counterparties when possible to mitigate credit risk in derivative transactions. A master netting arrangement may allow each counterparty to net settle amounts owed between a 3M entity and the counterparty as a result of multiple, separate derivative transactions. As of June 30, 2017, 3M has International Swaps and Derivatives Association (ISDA) agreements with 16 applicable banks and financial institutions which contain netting provisions. In addition to a master agreement with 3M supported by a primary counterparty’s parent guarantee, 3M also has associated credit support agreements in place with 15 of its primary derivative counterparties which, among other things, provide the circumstances under which either party is required to post eligible collateral (when the market value of transactions covered by these agreements exceeds specified thresholds or if a counterparty’s credit rating has been downgraded to a predetermined rating). The Company does not anticipate nonperformance by any of these counterparties. 3M has elected to present the fair value of derivative assets and liabilities within the Company’s consolidated balance sheet on a gross basis even when derivative transactions are subject to master netting arrangements and may otherwise qualify for net presentation. However, the following tables provide information as if the Company had elected to offset the asset and liability balances of derivative instruments, netted in accordance with various criteria in the event of default or termination as stipulated by the terms of netting arrangements with each of the counterparties. For each counterparty, if netted, the Company would offset the asset and liability balances of all derivatives at the end of the reporting period based on the 3M entity that is a party to the transactions. Derivatives not subject to master netting agreements are not eligible for net presentation. As of the applicable dates presented below, no collateral had been received or pledged related to these derivative instruments. Offsetting of Financial Assets under Master Netting Agreements with Derivative Counterparties Gross Amounts not Offset in the Consolidated Balance Sheet that are Subject Gross Amount of to Master Netting Agreements Derivative Assets Gross Amount of Presented in the Eligible Offsetting June 30, 2017 Consolidated Recognized Cash Collateral Net Amount of (Millions) Balance Sheet Derivative Liabilities Received Derivative Assets Derivatives subject to master netting agreements $ 90 $ 35 $ — $ 55 Derivatives not subject to master netting agreements — — Total $ 90 $ 55 December 31, 2016 (Millions) Derivatives subject to master netting agreements $ 259 $ 39 $ — $ 220 Derivatives not subject to master netting agreements — — Total $ 259 $ 220 Offsetting of Financial Liabilities under Master Netting Agreements with Derivative Counterparties Gross Amounts not Offset in the Consolidated Balance Sheet that are Subject Gross Amount of to Master Netting Agreements Derivative Liabilities Gross Amount of Presented in the Eligible Offsetting June 30, 2017 Consolidated Recognized Cash Collateral Net Amount of (Millions) Balance Sheet Derivative Assets Pledged Derivative Liabilities Derivatives subject to master netting agreements $ 189 $ 35 $ — $ 154 Derivatives not subject to master netting agreements 4 4 Total $ 193 $ 158 December 31, 2016 (Millions) Derivatives subject to master netting agreements $ 93 $ 39 $ — $ 54 Derivatives not subject to master netting agreements 2 2 Total $ 95 $ 56 Currency Effects 3M estimates that year-on-year foreign currency transactions effects, including hedging impacts, decreased pre-tax income by approximately $28 million and $65 million for the three and six months ended June 30, 2017, respectively. These estimates include transaction gains and losses, including derivative instruments designed to reduce foreign currency exchange rate risks and any impacts from swapping Venezuelan bolivars into U.S. dollars. |
Fair Value Measurements
Fair Value Measurements | 6 Months Ended |
Jun. 30, 2017 | |
Fair Value Measurements | |
Fair Value Measurements | NOTE 11. Fair Value Measurements 3M follows ASC 820, Fair Value Measurements and Disclosures , with respect to assets and liabilities that are measured at fair value on a recurring basis and nonrecurring basis. Under the standard, fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The standard also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. The hierarchy is broken down into three levels. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Assets and Liabilities that are Measured at Fair Value on a Recurring Basis: For 3M, assets and liabilities that are measured at fair value on a recurring basis primarily relate to available-for-sale marketable securities, available-for-sale investments (included as part of investments in the Consolidated Balance Sheet) and certain derivative instruments. Derivatives include cash flow hedges, interest rate swaps and net investment hedges. The information in the following paragraphs and tables primarily addresses matters relative to these financial assets and liabilities. Separately, there were no material fair value measurements with respect to nonfinancial assets or liabilities that are recognized or disclosed at fair value in the Company’s financial statements on a recurring basis for the three and six months ended June 30, 2017 and 2016. 3M uses various valuation techniques, which are primarily based upon the market and income approaches, with respect to financial assets and liabilities. Following is a description of the valuation methodologies used for the respective financial assets and liabilities measured at fair value. Available-for-sale marketable securities — except certain U.S. municipal securities: Marketable securities, except certain U.S. municipal securities, are valued utilizing multiple sources. A weighted average market price is used for these securities. Market prices are obtained for these securities from a variety of industry standard data providers, security master files from large financial institutions, and other third-party sources. These multiple prices are used as inputs into a distribution-curve-based algorithm to determine the daily fair value to be used. 3M classifies U.S. treasury securities as level 1, while all other marketable securities (excluding certain U.S. municipal securities) are classified as level 2. Marketable securities are discussed further in Note 7. Available-for-sale marketable securities — certain U.S. municipal securities only: In both 2016 and 2014, 3M obtained municipal bonds from the City of Nevada, Missouri, which represent 3M’s only U.S. municipal securities holding as of June 30, 2017 and December 31, 2016. Due to the nature of this security, the valuation method utilized will include the financial health of the City of Nevada, any recent municipal bond issuances by Nevada, and macroeconomic considerations related to the direction of interest rates and the health of the overall municipal bond market, and as such has been classified as a level 3 security. Available-for-sale investments: Investments include equity securities that are traded in an active market. Closing stock prices are readily available from active markets and are used as being representative of fair value. 3M classifies these securities as level 1. Derivative instruments: The Company’s derivative assets and liabilities within the scope of ASC 815, Derivatives and Hedging , are required to be recorded at fair value. The Company’s derivatives that are recorded at fair value include foreign currency forward and option contracts, commodity price swaps, interest rate swaps, and net investment hedges where the hedging instrument is recorded at fair value. Net investment hedges that use foreign currency denominated debt to hedge 3M’s net investment are not impacted by the fair value measurement standard under ASC 820, as the debt used as the hedging instrument is marked to a value with respect to changes in spot foreign currency exchange rates and not with respect to other factors that may impact fair value. 3M has determined that foreign currency forwards, commodity price swaps, currency swaps, foreign currency options, interest rate swaps and cross-currency swaps will be considered level 2 measurements. 3M uses inputs other than quoted prices that are observable for the asset. These inputs include foreign currency exchange rates, volatilities, and interest rates. Derivative positions are primarily valued using standard calculations/models that use as their basis readily observable market parameters. Industry standard data providers are 3M’s primary source for forward and spot rate information for both interest rates and currency rates, with resulting valuations periodically validated through third-party or counterparty quotes and a net present value stream of cash flows model. The following tables provide information by level for assets and liabilities that are measured at fair value on a recurring basis. Fair Value Measurements Description Fair Value at Using Inputs Considered as (Millions) June 30, 2017 Level 1 Level 2 Level 3 Assets: Available-for-sale: Marketable securities: Corporate debt securities $ 10 $ — $ 10 $ — Commercial paper 37 — 37 — Certificates of deposit/time deposits 53 — 53 — Asset-backed securities: Automobile loan related 28 — 28 — Credit card related 9 — 9 — U.S. municipal securities 20 — — 20 Derivative instruments — assets: Foreign currency forward/option contracts 66 — 66 — Interest rate swap contracts 24 — 24 — Liabilities: Derivative instruments — liabilities: Foreign currency forward/option contracts 187 — 187 — Interest rate swap contracts 6 — 6 — Fair Value Measurements Description Fair Value at Using Inputs Considered as (Millions) December 31, 2016 Level 1 Level 2 Level 3 Assets: Available-for-sale: Marketable securities: Corporate debt securities $ 10 $ — $ 10 $ — Commercial paper 14 — 14 — Certificates of deposit/time deposits 197 — 197 — Asset-backed securities: Automobile loan related 31 — 31 — Credit card related 18 — 18 — Other 7 — 7 — U.S. municipal securities 20 — — 20 Derivative instruments — assets: Foreign currency forward/option contracts 234 — 234 — Interest rate swap contracts 25 — 25 — Liabilities: Derivative instruments — liabilities: Foreign currency forward/option contracts 94 — 94 — Interest rate swap contracts 1 — 1 — The following table provides a reconciliation of the beginning and ending balances of items measured at fair value on a recurring basis in the table above that used significant unobservable inputs (Level 3). Three months ended Six months ended Marketable securities — certain U.S. municipal securities only June 30, June 30, (Millions) 2017 2016 2017 2016 Beginning balance $ 20 $ 18 $ 20 $ 12 Total gains or losses: Included in earnings — — — — Included in other comprehensive income — — — — Purchases and issuances — — — 6 Sales and settlements — — — — Transfers in and/or out of level 3 — — — — Ending balance $ 20 $ 18 $ 20 $ 18 Change in unrealized gains or losses for the period included in earnings for securities held at the end of the reporting period — — — — In addition, the plan assets of 3M’s pension and postretirement benefit plans are measured at fair value on a recurring basis (at least annually). Refer to Note 11 in 3M’s Current Report on Form 8-K dated May 4, 2017 (which updated 3M’s 2016 Annual Report on Form 10-K). Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis: Disclosures are required for certain assets and liabilities that are measured at fair value, but are recognized and disclosed at fair value on a nonrecurring basis in periods subsequent to initial recognition. For 3M, such measurements of fair value relate primarily to long-lived asset impairments. During the six months ended June 30, 2017, the Company recognized approximately $40 million in long-lived asset impairments related to its Electronics and Energy business segment, with the complete carrying amount of such assets written off and included in operating income results. There were no material long-lived asset impairments for the three months ended June 30, 2017 and the three and six months ended June 30, 2016. Fair Value of Financial Instruments: The Company’s financial instruments include cash and cash equivalents, marketable securities, accounts receivable, certain investments, accounts payable, borrowings, and derivative contracts. The fair values of cash and cash equivalents, accounts receivable, accounts payable, and short-term borrowings and current portion of long-term debt approximated carrying values because of the short-term nature of these instruments. Available-for-sale marketable securities and investments, in addition to certain derivative instruments, are recorded at fair values as indicated in the preceding disclosures. For its long-term debt, the Company utilized third-party quotes to estimate fair values (classified as level 2). Information with respect to the carrying amounts and estimated fair values of these financial instruments follow: June 30, 2017 December 31, 2016 Carrying Fair Carrying Fair (Millions) Value Value Value Value Long-term debt, excluding current portion $ 11,088 $ 11,567 $ 10,678 $ 11,168 The fair values reflected above consider the terms of the related debt absent the impacts of derivative/hedging activity. The carrying amount of long-term debt referenced above is impacted by certain fixed-to-floating interest rate swaps that are designated as fair value hedges and by the designation of fixed rate Eurobond securities issued by the Company as hedging instruments of the Company’s net investment in its European subsidiaries. Many of 3M’s fixed-rate bonds were trading at a premium at June 30, 2017 and December 31, 2016 due to the low interest rates and tightening of 3M’s credit spreads. |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2017 | |
Commitments and Contingencies | |
Commitments and Contingencies | NOTE 12. Commitments and Contingencies Legal Proceedings: The Company and some of its subsidiaries are involved in numerous claims and lawsuits, principally in the United States, and regulatory proceedings worldwide. These include various products liability (involving products that the Company now or formerly manufactured and sold), intellectual property, and commercial claims and lawsuits, including those brought under the antitrust laws, and environmental proceedings. Unless otherwise stated, the Company is vigorously defending all such litigation. Additional information about the Company’s process for disclosure and recording of liabilities and insurance receivables related to legal proceedings can be found in Note 14 “Commitments and Contingencies” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 as updated by the Company’s Current Report on Form 8-K dated May 4, 2017. The following sections first describe the significant legal proceedings in which the Company is involved, and then describe the liabilities and associated insurance receivables the Company has accrued relating to its significant legal proceedings. Respirator Mask/Asbestos Litigation As of June 30, 2017, the Company is a named defendant, with multiple co-defendants, in numerous lawsuits in various courts that purport to represent approximately 2,310 individual claimants, compared to approximately 2,660 individual claimants with actions pending at December 31, 2016. The vast majority of the lawsuits and claims resolved by and currently pending against the Company allege use of some of the Company’s mask and respirator products and seek damages from the Company and other defendants for alleged personal injury from workplace exposures to asbestos, silica, coal mine dust, or other occupational dusts found in products manufactured by other defendants or generally in the workplace. A minority of the lawsuits and claims resolved by and currently pending against the Company generally allege personal injury from occupational exposure to asbestos from products previously manufactured by the Company, which are often unspecified, as well as products manufactured by other defendants, or occasionally at Company premises. The Company’s current volume of new and pending matters is substantially lower than it experienced at the peak of filings in 2003. The Company expects that filing of claims by unimpaired claimants in the future will continue to be at much lower levels than in the past. Accordingly, the number of claims alleging more serious injuries, including mesothelioma and other malignancies, will represent a greater percentage of total claims than in the past. The Company has prevailed in all eleven cases taken to trial, including nine of the ten cases tried to verdict (such trials occurred in 1999, 2000, 2001, 2003, 2004, 2007, 2015, and 2016–described below), and an appellate reversal in 2005 of the 2001 jury verdict adverse to the Company. The remaining case, tried in 2009, was dismissed by the court at the close of plaintiff’s evidence, based on the court’s legal finding that the plaintiff had not presented sufficient evidence to support a jury verdict. In August 2016, 3M received a unanimous defense verdict from a jury in state court in Kentucky, in 3M’s first respirator trial involving coal mine dust. The estate of the plaintiff alleged that the 3M 8710 respirator is defective and caused his death because it did not protect him from harmful coal mine dust. The jury rejected plaintiff’s claim and returned a verdict finding no liability against 3M. The verdict is final as the plaintiff did not file an appeal. The Company has demonstrated in these past trial proceedings that its respiratory protection products are effective as claimed when used in the intended manner and in the intended circumstances. Consequently the Company believes that claimants are unable to establish that their medical conditions, even if significant, are attributable to the Company’s respiratory protection products. Nonetheless the Company’s litigation experience indicates that claims of persons with malignant conditions are costlier to resolve than the claims of unimpaired persons, and it therefore believes the average cost of resolving pending and future claims on a per-claim basis will continue to be higher than it experienced in prior periods when the vast majority of claims were asserted by medically unimpaired claimants. As previously reported, the State of West Virginia, through its Attorney General, filed a complaint in 2003 against the Company and two other manufacturers of respiratory protection products in the Circuit Court of Lincoln County, West Virginia, and amended its complaint in 2005. The amended complaint seeks substantial, but unspecified, compensatory damages primarily for reimbursement of the costs allegedly incurred by the State for worker’s compensation and healthcare benefits provided to all workers with occupational pneumoconiosis and unspecified punitive damages. The case was inactive from the fourth quarter of 2007 until late 2013, other than a case management conference in March 2011. In November 2013, the State filed a motion to bifurcate the lawsuit into separate liability and damages proceedings. At the hearing on the motion, the court declined to bifurcate the lawsuit. No liability has been recorded for this matter because the Company believes that liability is not probable and estimable at this time. In addition, the Company is not able to estimate a possible loss or range of loss given the lack of any meaningful discovery responses by the State of West Virginia, the otherwise minimal activity in this case and the fact that the complaint asserts claims against two other manufacturers where a defendant’s share of liability may turn on the law of joint and several liability and by the amount of fault, if any, a jury might allocate to each defendant if the case is ultimately tried. Respirator Mask/Asbestos Liabilities and Insurance Receivables: The Company annually conducts a comprehensive legal review of its respirator mask/asbestos liabilities in connection with finalizing and reporting its annual results of operations, unless significant changes in trends or new developments warrant an earlier review. The Company reviews recent and historical claims data, including without limitation, (i) the number of pending claims filed against the Company, (ii) the nature and mix of those claims (i.e., the proportion of claims asserting usage of the Company’s mask or respirator products and alleging exposure to each of asbestos, silica, coal or other occupational dusts, and claims pleading use of asbestos-containing products allegedly manufactured by the Company), (iii) the costs to defend and resolve pending claims, and (iv) trends in filing rates and in costs to defend and resolve claims, (collectively, the “Claims Data”). As part of its comprehensive legal review, the Company provides the Claims Data to a third party with expertise in determining the impact of Claims Data on future filing trends and costs. The third party assists the Company in estimating the costs to defend and resolve pending and future claims. The Company uses these estimates to develop its best estimate of probable liability. Developments may occur that could affect the Company’s estimate of its liabilities. These developments include, but are not limited to, significant changes in (i) the key assumptions underlying the Company’s accrual, including, the number of future claims, the nature and mix of those claims, the average cost of defending and resolving claims, and in maintaining trial readiness (ii) trial and appellate outcomes, (iii) the law and procedure applicable to these claims, and (iv) the financial viability of other co-defendants and insurers. In the first six months of 2017, the Company made payments for legal fees and settlements of $34 million related to the respirator mask/asbestos litigation, $22 million of which occurred in the second quarter of 2017. As of June 30, 2017, the Company had an accrual for respirator mask/asbestos liabilities (excluding Aearo accruals) of $561 million. This accrual represents the Company’s best estimate of probable loss and reflects an estimation period for future claims that may be filed against the Company approaching the year 2050. The Company cannot estimate the amount or upper end of the range of amounts by which the liability may exceed the accrual the Company has established because of the (i) inherent difficulty in projecting the number of claims that have not yet been asserted or the time period in which future claims may be asserted, (ii) the complaints nearly always assert claims against multiple defendants where the damages alleged are typically not attributed to individual defendants so that a defendant’s share of liability may turn on the law of joint and several liability, which can vary by state, (iii) the multiple factors described above that the Company considers in estimating its liabilities, and (iv) the several possible developments described above that may occur that could affect the Company’s estimate of liabilities. As of June 30, 2017, the Company’s receivable for insurance recoveries related to the respirator mask/asbestos litigation was $4 million. The Company is seeking coverage under the policies of certain insolvent and other insurers. Once those claims for coverage are resolved, the Company will have collected substantially all of its remaining insurance coverage for respirator mask/asbestos claims. Respirator Mask/Asbestos Litigation — Aearo Technologies On April 1, 2008, a subsidiary of the Company purchased the stock of Aearo Holding Corp., the parent of Aearo Technologies (“Aearo”). Aearo manufactured and sold various products, including personal protection equipment, such as eye, ear, head, face, fall and certain respiratory protection products. As of June 30, 2017, Aearo and/or other companies that previously owned and operated Aearo’s respirator business (American Optical Corporation, Warner-Lambert LLC, AO Corp. and Cabot Corporation (“Cabot”)) are named defendants, with multiple co-defendants, including the Company, in numerous lawsuits in various courts in which plaintiffs allege use of mask and respirator products and seek damages from Aearo and other defendants for alleged personal injury from workplace exposures to asbestos, silica-related, or other occupational dusts found in products manufactured by other defendants or generally in the workplace. As of June 30, 2017, the Company, through its Aearo subsidiary, had accruals of $18 million for product liabilities and defense costs related to current and future Aearo-related asbestos and silica-related claims. Responsibility for legal costs, as well as for settlements and judgments, is currently shared in an informal arrangement among Aearo, Cabot, American Optical Corporation and a subsidiary of Warner Lambert and their respective insurers (the “Payor Group”). Liability is allocated among the parties based on the number of years each company sold respiratory products under the “AO Safety” brand and/or owned the AO Safety Division of American Optical Corporation and the alleged years of exposure of the individual plaintiff. Aearo’s share of the contingent liability is further limited by an agreement entered into between Aearo and Cabot on July 11, 1995. This agreement provides that, so long as Aearo pays to Cabot a quarterly fee of $100,000, Cabot will retain responsibility and liability for, and indemnify Aearo against, any product liability claims involving exposure to asbestos, silica, or silica products for respirators sold prior to July 11, 1995. Because of the difficulty in determining how long a particular respirator remains in the stream of commerce after being sold, Aearo and Cabot have applied the agreement to claims arising out of the alleged use of respirators involving exposure to asbestos, silica or silica products prior to January 1, 1997. With these arrangements in place, Aearo’s potential liability is limited to exposures alleged to have arisen from the use of respirators involving exposure to asbestos, silica, or silica products on or after January 1, 1997. To date, Aearo has elected to pay the quarterly fee. Aearo could potentially be exposed to additional claims for some part of the pre-July 11, 1995 period covered by its agreement with Cabot if Aearo elects to discontinue its participation in this arrangement, or if Cabot is no longer able to meet its obligations in these matters. In March 2012, Cabot CSC Corporation and Cabot Corporation filed a lawsuit against Aearo in the Superior Court of Suffolk County, Massachusetts seeking declaratory relief as to the scope of Cabot’s indemnity obligations under the July 11, 1995 agreement, including whether Cabot has retained liability for coal workers’ pneumoconiosis claims, and seeking damages for breach of contract. In 2014, the court granted Aearo’s motion for summary judgment on two claims, but declined to rule on two issues: the specific liability for certain known coal mine dust lawsuits; and Cabot’s claim for allocation of liability between injuries allegedly caused by exposure to coal mine dust and injuries allegedly caused by exposure to silica dust. Following additional discovery, the parties filed new motions for summary judgment. In February 2016, the court ruled in favor of Aearo on these two remaining issues, and ordered that Cabot, and not Aearo, is solely responsible for all liability for the coal mine dust lawsuits under the 1995 agreement. In May 2017, the Massachusetts Court of Appeals affirmed the trial court order in favor of Aearo. Developments may occur that could affect the estimate of Aearo’s liabilities. These developments include, but are not limited to: (i) significant changes in the number of future claims, (ii) significant changes in the average cost of resolving claims, (iii) significant changes in the legal costs of defending these claims, (iv) significant changes in the mix and nature of claims received, (v) trial and appellate outcomes, (vi) significant changes in the law and procedure applicable to these claims, (vii) significant changes in the liability allocation among the co-defendants, (viii) the financial viability of members of the Payor Group including exhaustion of available insurance coverage limits, and/or (ix) a determination that the interpretation of the contractual obligations on which Aearo has estimated its share of liability is inaccurate. The Company cannot determine the impact of these potential developments on its current estimate of Aearo’s share of liability for these existing and future claims. If any of the developments described above were to occur, the actual amount of these liabilities for existing and future claims could be significantly larger than the amount accrued. Because of the inherent difficulty in projecting the number of claims that have not yet been asserted, the complexity of allocating responsibility for future claims among the Payor Group, and the several possible developments that may occur that could affect the estimate of Aearo’s liabilities, the Company cannot estimate the amount or range of amounts by which Aearo’s liability may exceed the accrual the Company has established. Environmental Matters and Litigation The Company’s operations are subject to environmental laws and regulations including those pertaining to air emissions, wastewater discharges, toxic substances, and the handling and disposal of solid and hazardous wastes enforceable by national, state, and local authorities around the world, and private parties in the United States and abroad. These laws and regulations provide, under certain circumstances, a basis for the remediation of contamination, for restoration of or compensation for damages to natural resources, and for personal injury and property damage claims. The Company has incurred, and will continue to incur, costs and capital expenditures in complying with these laws and regulations, defending personal injury and property damage claims, and modifying its business operations in light of its environmental responsibilities. In its effort to satisfy its environmental responsibilities and comply with environmental laws and regulations, the Company has established, and periodically updates, policies relating to environmental standards of performance for its operations worldwide. Under certain environmental laws, including the United States Comprehensive Environmental Response, Compensation and Liability Act of 1980 and similar state laws, the Company may be jointly and severally liable, typically with other companies, for the costs of remediation of environmental contamination at current or former facilities and at off-site locations. The Company has identified numerous locations, most of which are in the United States, at which it may have some liability. Please refer to the section entitled “ Environmental Liabilities and Insurance Receivables” that follows for information on the amount of the accrual. Environmental Matters As previously reported, the Company has been voluntarily cooperating with ongoing reviews by local, state, federal (primarily the U.S. Environmental Protection Agency (EPA)), and international agencies of possible environmental and health effects of various perfluorinated compounds, including perfluorooctanyl compounds such as perfluorooctanoate (“PFOA”), perfluorooctane sulfonate (“PFOS”), or similar compounds (“PFCs”). As a result of its phase-out decision in May 2000, the Company no longer manufactures perfluorooctanyl compounds. The company ceased manufacturing and using the vast majority of these compounds within approximately two years of the phase-out announcement, and ceased all manufacturing and the last significant use of this chemistry by the end of 2008. Through its ongoing life cycle management and its raw material composition identification processes associated with the Company’s policies covering the use of all persistent and bio-accumulative materials, the Company continues to control or eliminate the presence of certain PFCs in purchased materials or as byproducts in some of 3M’s fluorochemical manufacturing processes, products, and waste streams. Regulatory activities concerning PFOA and/or PFOS continue in the United States, Europe and elsewhere, and before certain international bodies. These activities include gathering of exposure and use information, risk assessment, and consideration of regulatory approaches. As the database of studies of both PFOA and PFOS has expanded, the EPA has developed human health effects documents summarizing the available data from these studies. In February 2014, the EPA initiated external peer review of its draft human health effects documents for PFOA and PFOS. The peer review panel met in August 2014. In May 2016, the EPA announced lifetime health advisory levels for PFOA and PFOS at 70 parts per trillion (ppt) (superseding the provisional levels established by the EPA in 2009 of 400 ppt for PFOA and 200 ppt for PFOS). Where PFOA and PFOS are found together, EPA recommends that the concentrations be added together, and the lifetime health advisory for PFOA and PFOS combined is also 70 ppt. Lifetime health advisories, while not enforceable, serve as guidance and are benchmarks for determining if concentrations of chemicals in tap water from public utilities are safe for public consumption. In an effort to collect exposure information under the Safe Drinking Water Act, the EPA published on May 2, 2012 a list of unregulated substances, including six PFCs, required to be monitored during the period 2013-2015 by public water system suppliers to determine the extent of their occurrence. Through January 2017, the EPA reported results for 4,920 public water supplies nationwide. Based on the 2016 lifetime health advisory, 13 public water supplies exceed the level for PFOA and 46 exceed the level for PFOS (unchanged from the July 2016 EPA summary). A technical advisory issued by EPA in September 2016 on laboratory analysis of drinking water samples stated that 65 public water supplies had exceeded the combined level for PFOA and PFOS. These results are based on one or more samples collected during the period 2012-2015 and do not necessarily reflect current conditions of these public water supplies. EPA reporting does not identify the sources of the PFOA and PFOS in the public water supplies. The Company is continuing to make progress in its work, under the supervision of state regulators, to address its historic disposal of PFC-containing waste associated with manufacturing operations at the Decatur, Alabama, Cottage Grove, Minnesota, and Cordova, Illinois plants. As previously reported, the Company entered into a voluntary remedial action agreement with the Alabama Department of Environmental Management (ADEM) to address the presence of PFCs in the soil at the Company’s manufacturing facility in Decatur, Alabama. Pursuant to a permit issued by ADEM, for approximately twenty years, the Company incorporated its wastewater treatment plant sludge containing PFCs in fields at its Decatur facility. After a review of the available options to address the presence of PFCs in the soil, ADEM agreed that the preferred remediation option is to use a multilayer cap over the former sludge incorporation areas on the manufacturing site with subsequent groundwater migration controls and treatment. Implementation of that plan continues and is expected to be completed in 2018. The Company continues to work with the Minnesota Pollution Control Agency (MPCA) pursuant to the terms of the previously disclosed May 2007 Settlement Agreement and Consent Order to address the presence of certain PFCs in the soil and groundwater at former disposal sites in Washington County, Minnesota (Oakdale and Woodbury) and at the Company’s manufacturing facility at Cottage Grove, Minnesota. Under this agreement, the Company’s principal obligations include (i) evaluating releases of certain PFCs from these sites and proposing response actions; (ii) providing treatment or alternative drinking water upon identifying any level exceeding a Health Based Value (“HBV”) or Health Risk Limit (“HRL”) (i.e., the amount of a chemical in drinking water determined by the Minnesota Department of Health (MDH) to be safe for human consumption over a lifetime) for certain PFCs for which a HBV and/or HRL exists as a result of contamination from these sites; (iii) remediating identified sources of other PFCs at these sites that are not controlled by actions to remediate PFOA and PFOS; and (iv) sharing information with the MPCA about certain perfluorinated compounds. During 2008, the MPCA issued formal decisions adopting remedial options for the former disposal sites in Washington County, Minnesota (Oakdale and Woodbury). In August 2009, the MPCA issued a formal decision adopting remedial options for the Company’s Cottage Grove manufacturing facility. During the spring and summer of 2010, 3M began implementing the agreed upon remedial options at the Cottage Grove and Woodbury sites. 3M commenced the remedial option at the Oakdale site in late 2010. At each location the remedial options were recommended by the Company and approved by the MPCA. Remediation work has been completed at the Oakdale and Woodbury sites, and they are in an operational maintenance mode. Remediation will continue at the Cottage Grove site during 2017. In August 2014, the Illinois EPA approved a request by the Company to establish a groundwater management zone at its manufacturing facility in Cordova, Illinois, which includes ongoing pumping of impacted site groundwater, groundwater monitoring, and routine reporting of results. In May 2017, the MDH issued new HBVs for PFOS and PFOA. The new HBVs are 35 ppt for PFOA and 27 ppt for PFOS. In connection with its announcement, the MDH stated that “Drinking water with PFOA and PFOS, even at the levels above the updated values, does not represent an immediate health risk. These values are designed to reduce long-term health risks across the population and are based on multiple safety factors to protect the most vulnerable citizens, which makes them overprotective for most of the residents in our state.” The Company cannot predict what additional regulatory actions arising from the foregoing proceedings and activities, if any, may be taken regarding such compounds or the consequences of any such actions. Environmental Litigation As previously reported, a former employee filed a purported class action lawsuit in 2002 in the Circuit Court of Morgan County, Alabama (the St. John case), seeking unstated damages and alleging that the plaintiffs suffered fear, increased risk, subclinical injuries, and property damage from exposure to certain perfluorochemicals at or near the Company’s Decatur, Alabama, manufacturing facility. The court in 2005 granted the Company’s motion to dismiss the named plaintiff’s personal injury-related claims on the basis that such claims are barred by the exclusivity provisions of the state’s Workers Compensation Act. The plaintiffs’ counsel filed an amended complaint in November 2006, limiting the case to property damage claims on behalf of a purported class of residents and property owners in the vicinity of the Decatur plant. In June 2015, the plaintiffs filed an amended complaint adding additional defendants, including BFI Waste Management Systems of Alabama, LLC; BFI Waste Management of North America, LLC; the City of Decatur, Alabama; Morgan County, Alabama; Municipal Utilities Board of Decatur; and Morgan County, Alabama, d/b/a Decatur Utilities. In 2005, the judge in a second purported class action lawsuit filed by three residents of Morgan County, Alabama, seeking unstated compensatory and punitive damages involving alleged damage to their property from emissions of certain perfluorochemical compounds from the Company’s Decatur, Alabama, manufacturing facility that formerly manufactured those compounds (the Chandler case) granted the Company’s motion to abate the case, effectively putting the case on hold pending the resolution of class certification issues in the St. John case. Despite the stay, plaintiffs filed an amended complaint seeking damages for alleged personal injuries and property damage on behalf of the named plaintiffs and the members of a purported class. No further action in the case is expected unless and until the stay is lifted. In February 2009, a resident of Franklin County, Alabama, filed a purported class action lawsuit in the Circuit Court of Franklin County (the Stover case) seeking compensatory damages and injunctive relief based on the application by the Decatur utility’s wastewater treatment plant of wastewater treatment sludge to farmland and grasslands in the state that allegedly contain PFOA, PFOS and other perfluorochemicals. The named plaintiff seeks to represent a class of all persons within the State of Alabama who have had PFOA, PFOS, and other perfluorochemicals released or deposited on their property. In March 2010, the Alabama Supreme Court ordered the case transferred from Franklin County to Morgan County. In May 2010, consistent with its handling of the other matters, the Morgan County Circuit Court abated this case, putting it on hold pending the resolution of the class certification issues in the St. John case. In October 2015, West Morgan-East Lawrence Water & Sewer Authority (Water Authority) filed an individual complaint against 3M Company, Dyneon, L.L.C, and Daikin America, Inc., in the U.S. District Court for the Northern District of Alabama. The complaint also includes representative plaintiffs who brought the complaint on behalf of themselves, and a class of all owners and possessors of property who use water provided by the Water Authority and five local water works to which the Water Authority supplies water (collectively, the “Water Utilities”). The complaint seeks compensatory and punitive damages and injunctive relief based on allegations that the defendants’ chemicals, including PFOA and PFOS from their manufacturing processes in Decatur, have contaminated the water in the Tennessee River at the water intake, and that the chemicals cannot be removed by the water treatment processes utilized by the Water Authority. In September 2016, the court granted 3M’s motion to dismiss plaintiffs’ trespass claims with prejudice, negligence claims for personal injuries, and private nuisance claims, and denied the motion to dismiss the plaintiffs’ negligence claims for property damage, public nuisance, abatement of nuisance, battery and wantonness. In June 2016, the Tennessee Riverkeeper, Inc. (Riverkeeper), a non-profit corporation, filed a lawsuit in the U.S. District Court for the Northern District of Alabama against 3M; BFI Waste Systems of Alabama; the City of Decatur, Alabama; and the Municipal Utilities Board of Decatur, Morgan County, Alabama. The complaint alleges that the defendants violated the Resource Conservation and Recovery Act in connection with the disposal of certain PFCs through their ownership and operation of their respective sites. The complaint further alleges such practices may present an imminent and substantial endangerment to health and/or the environment and that Riverkeeper has suffered and will continue to suffer irreparable harm caused by defendants’ failure to abate the endangerment unless the court grants the requested relief, including declaratory and injunctive relief. The Company believes that the complaint lacks merit. In July 2016, the City of Lake Elmo filed a lawsuit in the U.S. District Court for the District of Minnesota against 3M alleging that the City suffered damages from drinking water supplies contaminated with PFCs, including costs to construct alternative sources of drinking water. Trial is scheduled to begin in February 2018. In September 2016, the Water Works and Sewer Board of the City of Gadsden, Alabama filed a lawsuit in the Circuit Court of Etowah County Alabama against 3M and various carpet manufacturers. The complaint alleges that PFCs from the defendants’ facilities contaminated the Coosa River as its raw water source for drinking water and seeks unstated damages for the installation and operation of a filtration system, expenses to monitor PFC levels, and lost profits and sales. In November 2016, the Town of Barnstable, Massachusetts filed an individual action in the U.S. District Court for the District of Massachusetts seeking unstated compensatory and punitive damages and other relief against 3M and other suppliers of AFFF for alleged contamination of the aquifer supplying drinking water to the Hyannis water system. The town seeks to recover costs associated with the investigation, treatment, remediation, and monitoring of drinking water supplies allegedly contaminated with certain PFCs used in AFFF. In January 2017, the County of Barnstable, Massachusetts, filed an individual action in the U.S. District Court for the District of Massachusetts seeking unstated compensatory and punitive damages and other relief (including indemnification and contribution in connection with claims asserted against the County by the Town of Barnstable) against 3M and other suppliers of AFFF for alleged contamination of the aquifer supplying drinking water to the Hyannis water system. In January 2017, several hundred plaintiffs sued 3M, its subsidiary Dyneon, and Daikin American in Lawrence and Morgan Counties, Alabama. The plaintiffs are owners of property, residents, and holders of property interests who receive their water from the West Morgan-East Lawrence Water and Sewer Authority (Authority). They assert common law claims for negligence, nuisance, trespass, wantonness, and battery, and they seek injunctive relief and punitive damages. The plaintiffs contend that the defendants own and operate manufacturing and disposal facilities in Decatur that have released and continue to release PFOA, PFOS and related chemicals into the groundwater and surface water of their sites, resulting in discharge into the Tennessee River. The plaintiffs also contend that the defendants have discharged into Bakers Creek and the Decatur Utilities Dry Creek Wastewater Treatment Plant, which, in turn, discharges wastewater containing these chemicals into the Tennessee River. The plaintiffs contend that, as a result the alleged discharges, the water supplied by the Authority to the plaintiffs was, and is, contaminated with PFOA, PFOS, and related chemicals at a |
Stock-Based Compensation
Stock-Based Compensation | 6 Months Ended |
Jun. 30, 2017 | |
Stock-Based Compensation | |
Stock-Based Compensation | NOTE 13. Stock-Based Compensation The 3M 2016 Long-Term Incentive Plan (LTIP), as discussed in 3M’s Current Report on Form 8-K dated May 4, 2017 (which updated 3M’s 2016 Annual Report on Form 10-K), provides for the issuance or delivery of up to 123,965,000 shares of 3M common stock pursuant to awards granted under the plan. Awards may be issued in the form of incentive stock options, nonqualified stock options, progressive stock options, stock appreciation rights, restricted stock, restricted stock units, other stock awards, and performance units and performance shares. The remaining total shares available for grant under the LTIP Program are 30,069,336 as of June 30, 2017. The Company’s annual stock option and restricted stock unit grant is made in February to provide a strong and immediate link between the performance of individuals during the preceding year and the size of their annual stock compensation grants. The grant to eligible employees uses the closing stock price on the grant date. Accounting rules require recognition of expense under a non-substantive vesting period approach, requiring compensation expense recognition when an employee is eligible to retire. Employees are considered eligible to retire at age 55 and after having completed ten years of service. This retiree-eligible population represents 35 percent of the 2017 annual grant stock-based compensation award expense dollars; therefore, higher stock-based compensation expense is recognized in the first quarter. In addition to the annual grants, the Company makes other minor grants of stock options, restricted stock units and other stock-based grants. The Company issues cash settled restricted stock units and stock appreciation rights in certain countries. These grants do not result in the issuance of common stock and are considered immaterial by the Company. Amounts recognized in the financial statements with respect to stock-based compensation programs, which include stock options, restricted stock, restricted stock units, performance shares and the General Employees’ Stock Purchase Plan (GESPP), are provided in the following table. Capitalized stock-based compensation amounts were not material for the three and six months ended June 30, 2017 and 2016. Stock-Based Compensation Expense Three months ended Six months ended June 30, June 30, (Millions) 2017 2016 2017 2016 Cost of sales $ 9 $ 8 $ 32 $ 31 Selling, general and administrative expenses 43 34 141 130 Research, development and related expenses 7 7 33 32 Stock-based compensation expenses $ 59 $ 49 $ 206 $ 193 Income tax benefits $ (74) $ (72) $ (222) $ (199) Stock-based compensation expenses (benefits), net of tax $ (15) $ (23) $ (16) $ (6) Stock Option Program The following table summarizes stock option activity during the six months ended June 30, 2017: Weighted Average Weighted Remaining Aggregate Number of Average Contractual Intrinsic Value Options Exercise Price Life (months) (millions) Under option — January 1 36,196,232 $ 112.07 Granted: Annual 5,409,628 175.93 Exercised (4,667,165) 89.38 Canceled (122,880) 161.12 June 30 36,815,815 $ 124.16 75 $ 3,093 Options exercisable June 30 26,069,052 $ 107.43 61 $ 2,627 Stock options vest over a period from one year to three years with the expiration date at 10 years from date of grant. As of June 30, 2017, there was $104 million of compensation expense that has yet to be recognized related to non-vested stock option based awards. This expense is expected to be recognized over the remaining weighted-average vesting period of 23 months. The total intrinsic values of stock options exercised were $465 million and $469 million during the six months ended June 30, 2017 and 2016, respectively. Cash received from options exercised was $416 million and $534 million for the six months ended June 30, 2017 and 2016, respectively. The Company’s actual tax benefits realized for the tax deductions related to the exercise of employee stock options were $158 million and $173 million for the six months ended June 30, 2017 and 2016, respectively. For the primary 2017 annual stock option grant, the weighted average fair value at the date of grant was calculated using the Black-Scholes option-pricing model and the assumptions that follow. Stock Option Assumptions Annual 2017 Exercise price $ 175.76 Risk-free interest rate 2.1 % Dividend yield 2.5 % Expected volatility 17.3 % Expected life (months) 78 Black-Scholes fair value $ 23.51 Expected volatility is a statistical measure of the amount by which a stock price is expected to fluctuate during a period. For the 2017 annual grant date, the Company estimated the expected volatility based upon the average of the most recent one year volatility, the median of the term of the expected life rolling volatility, the median of the most recent term of the expected life volatility of 3M stock, and the implied volatility on the grant date. The expected life assumption is based on the weighted average of historical grants. Restricted Stock and Restricted Stock Units The following table summarizes restricted stock and restricted stock unit activity during the six months ended June 30, 2017: Weighted Average Number of Grant Date Awards Fair Value Nonvested balance — As of January 1 2,185,046 $ 145.64 Granted Annual 604,256 176.10 Other 1,547 184.98 Vested (758,403) 126.75 Forfeited (31,511) 157.36 As of June 30 2,000,935 $ 161.84 As of June 30, 2017, there was $112 million of compensation expense that has yet to be recognized related to non-vested restricted stock units and restricted stock. This expense is expected to be recognized over the remaining weighted-average vesting period of 24 months. The total fair value of restricted stock units and restricted stock that vested during the six months ended June 30, 2017 and 2016 was $134 million and $136 million, respectively. The Company’s actual tax benefits realized for the tax deductions related to the vesting of restricted stock units and restricted stock was $44 million and $51 million for the six months ended June 30, 2017 and 2016, respectively. Restricted stock units granted generally vest three years following the grant date assuming continued employment. Dividend equivalents equal to the dividends payable on the same number of shares of 3M common stock accrue on these restricted stock units during the vesting period, although no dividend equivalents are paid on any of these restricted stock units that are forfeited prior to the vesting date. Dividends are paid out in cash at the vest date on restricted stock units. Since the rights to dividends are forfeitable, there is no impact on basic earnings per share calculations. Weighted average restricted stock unit shares outstanding are included in the computation of diluted earnings per share. Performance Shares Instead of restricted stock units, the Company makes annual grants of performance shares to members of its executive management. The 2017 performance criteria for these performance shares (organic volume growth, return on invested capital, free cash flow conversion, and earning per share growth) were selected because the Company believes that they are important drivers of long-term stockholder value. The number of shares of 3M common stock that could actually be delivered at the end of the three-year performance period may be anywhere from 0% to 200% of each performance share granted, depending on the performance of the Company during such performance period. Non-substantive vesting requires that expense for the performance shares be recognized over one or three years depending on when each individual became a 3M executive. The 2017 performance share grant accrues dividends, therefore the grant date fair value is equal to the closing stock price on the date of grant. Since the rights to dividends are forfeitable, there is no impact on basic earnings per share calculations. Weighted average performance shares whose performance period is complete are included in computation of diluted earnings per share. The following table summarizes performance share activity during the six months ended June 30, 2017: Weighted Average Number of Grant Date Awards Fair Value Undistributed balance — As of January 1 656,278 $ 142.98 Granted 187,480 189.81 Distributed (312,173) 124.63 Performance change 65,216 173.25 Forfeited (9,275) 168.09 As of June 30 587,526 $ 170.63 As of June 30, 2017, there was $42 million of compensation expense that has yet to be recognized related to performance shares. This expense is expected to be recognized over the remaining weighted-average earnings period of 11 months. The total fair values of performance shares that were distributed were $55 million and $54 million for the six months ended June 30, 2017 and 2016, respectively. The Company’s actual tax benefits realized for the tax deductions related to the distribution of performance shares were $15 million for both the six months ended June 30, 2017 and 2016. |
Business Segments
Business Segments | 6 Months Ended |
Jun. 30, 2017 | |
Business Segment | |
Business Segments | NOTE 14. Business Segments 3M’s businesses are organized, managed and internally grouped into segments based on differences in markets, products, technologies and services. 3M manages its operations in five business segments: Industrial; Safety and Graphics; Health Care; Electronics and Energy; and Consumer. 3M’s five business segments bring together common or related 3M technologies, enhancing the development of innovative products and services and providing for efficient sharing of business resources. Transactions among reportable segments are recorded at cost. 3M is an integrated enterprise characterized by substantial intersegment cooperation, cost allocations and inventory transfers. Therefore, management does not represent that these segments, if operated independently, would report the operating income information shown. The difference between operating income and pre-tax income relates to interest income and interest expense, which are not allocated to business segments. Effective in the first quarter of 2017, as part of 3M’s continuing effort to improve the alignment of its businesses around markets and customers the Company made the following changes: 1. Integrated the former Renewable Energy Division into existing divisions; 2. Combined two divisions to form the Automotive and Aerospace Solutions Division; and 3. Consolidated U.S. customer account activity - impacting dual credit reporting Integration of former Renewable Energy Division · The (a) solar and wind and (b) energy product lines (along with certain technology previously included in Corporate and Unallocated) of the former Renewable Energy Division (RED) were integrated into the existing Electrical Markets Division and Electronics Materials and Solutions Division, respectively, within the Electronics and Energy business segment. In addition, the former RED’s window film product lines were moved into the Commercial Solutions Division within the Safety and Graphics business segment. This change resulted in a decrease in previously reported net sales and operating income for total year 2016 of $203 million and $38 million, respectively, in the Electronics and Energy segment. These decreases were offset by a $207 million and $29 million increase in previously reported total year 2016 net sales and operating income, respectively, in the Safety and Graphics business segment and a $4 million decrease and $9 million increase in previously reported net sales and operating income, respectively, in Corporate and Unallocated. Creation of Automotive and Aerospace Solutions Division · The former Automotive Division and Aerospace and Commercial Transportation Division (both within the Industrial business segment) were combined to create the Automotive and Aerospace Solutions Division. Because this realignment was within the Industrial business segment, it had no impact on business segment reporting. Consolidation of U.S. customer account activity - impacting dual credit reporting · The Company consolidated its customer account activity in the U.S. into more centralized sales districts to better serve customers. As discussed further below, 3M business segment reporting measures include dual credit to business segments for certain U.S. sales and related operating income. This dual credit is based on which business segment provides customer account activity (“sales district”) with respect to a particular product sold in the U.S. Previously, a customer in the U.S. may have been aligned to several sales districts associated with multiple divisions or segments based on the individual products the customer purchased across 3M’s portfolio. The alignment of U.S. customer accounts to fewer, more focused sales districts therefore changed the attribution of dual credit across 3M’s business segments. As a result, previously reported aggregate business segment net sales and operating income for total year 2016 increased $163 million and $36 million, respectively, offset by similar increases in the elimination of dual credit net sales and operating income amounts. The financial information presented herein reflects the impact of the preceding business segment reporting changes for all periods presented. Business Segment Information Three months ended Six months ended June 30, June 30, (Millions) 2017 2016 2017 2016 Net Sales Industrial $ 2,720 $ 2,654 $ 5,429 $ 5,253 Safety and Graphics 1,547 1,561 3,074 3,038 Health Care 1,440 1,414 2,863 2,805 Electronics and Energy 1,214 1,129 2,424 2,218 Consumer 1,137 1,130 2,179 2,180 Corporate and Unallocated 2 3 4 3 Elimination of Dual Credit (250) (229) (478) (426) Total Company $ 7,810 $ 7,662 $ 15,495 $ 15,071 Operating Income Industrial $ 523 $ 620 $ 1,148 $ 1,242 Safety and Graphics 852 421 1,251 780 Health Care 412 462 846 919 Electronics and Energy 301 217 526 412 Consumer 195 281 417 519 Corporate and Unallocated (44) (84) (125) (124) Elimination of Dual Credit (55) (51) (105) (94) Total Company $ 2,184 $ 1,866 $ 3,958 $ 3,654 Corporate and unallocated operating income includes a variety of miscellaneous items, such as corporate investment gains and losses, certain derivative gains and losses, certain insurance-related gains and losses, certain litigation and environmental expenses, corporate restructuring charges and certain under- or over-absorbed costs (e.g. pension, stock-based compensation) that the Company may choose not to allocate directly to its business segments. Because this category includes a variety of miscellaneous items, it is subject to fluctuation on a quarterly and annual basis. 3M business segment reporting measures include dual credit to business segments for certain U.S. sales and related operating income. Management evaluates each of its five business segments based on net sales and operating income performance, including dual credit U.S. reporting to further incentivize U.S. sales growth. As a result, 3M reflects additional (“dual”) credit to another business segment when the customer account activity (“sales district”) with respect to the particular product sold to the external customer in the U.S. is provided by a different business segment. This additional dual credit is largely reflected at the division level. For example, certain respirators are primarily sold by the Personal Safety Division within the Safety and Graphics business segment; however, a sales district within the Industrial business segment provides the contact for sales of the product to particular customers in the U.S. market. In this example, the non-primary selling segment (Industrial) would also receive credit for the associated net sales initiated though its sales district and the related approximate operating income. The assigned operating income related to dual credit activity may differ from operating income that would result from actual costs associated with such sales. The offset to the dual credit business segment reporting is reflected as a reconciling item entitled “Elimination of Dual Credit,” such that sales and operating income for the U.S. in total are unchanged. Certain sales and operating income results for electronic bonding product lines are equally divided between the Electronics and Energy business segment and the Industrial business segment. |
Significant Accounting Polici21
Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2017 | |
Significant Accounting Policies | |
Basis of Presentation | Basis of Presentation The interim consolidated financial statements are unaudited but, in the opinion of management, reflect all adjustments necessary for a fair statement of the Company’s consolidated financial position, results of operations and cash flows for the periods presented. These adjustments consist of normal, recurring items. The results of operations for any interim period are not necessarily indicative of results for the full year. The interim consolidated financial statements and notes are presented as permitted by the requirements for Quarterly Reports on Form 10-Q. As described in 3M’s Current Report on Form 8-K dated May 4, 2017 (which updated 3M’s 2016 Annual Report on Form 10-K) and 3M’s Quarterly Report on Form 10-Q for the period ended March 31, 2017, effective in the first quarter of 2017, the Company changed its business segment reporting in its continuing effort to improve the alignment of businesses around markets and customers. These changes included the integration of the former Renewable Energy Division into existing divisions, the combining of two divisions to form the Automotive and Aerospace Solutions Division, and consolidation of U.S. customer account activity, impacting dual credit reporting. Segment information presented herein reflects the impact of these changes for all periods presented. This Quarterly Report on Form 10-Q should be read in conjunction with the Company’s consolidated financial statements and notes included in its Current Report on Form 8-K dated May 4, 2017. |
Foreign Currency Translation | Foreign Currency Translation Local currencies generally are considered the functional currencies outside the United States. Assets and liabilities for operations in local-currency environments are translated at month-end exchange rates of the period reported. Income and expense items are translated at month-end exchange rates of each applicable month. Cumulative translation adjustments are recorded as a component of accumulated other comprehensive income (loss) in shareholders’ equity. 3M has a subsidiary in Venezuela, the financial statements of which are remeasured as if its functional currency were that of its parent because Venezuela’s economic environment is considered highly inflationary. The operating income of this subsidiary represented less than 1.0 percent of 3M’s consolidated operating income for 2016. The Venezuelan government sets official rates of exchange and conditions precedent to purchase foreign currency at these rates with local currency. The government also operates various expanded secondary currency exchange mechanisms that have been eliminated and replaced from time to time. Such rates and conditions have been and continue to be subject to change. For the periods presented, the financial statements of 3M’s Venezuelan subsidiary were remeasured utilizing the rate associated with the secondary auction mechanism, Tipo de Cambio Complementario, which was redesigned by the Venezuelan government in June 2017, (DICOM2), or its predecessor. During the same periods, the Venezuelan government’s official exchange was Tipo de Cambio Protegido (DIPRO), or its predecessor. Note 1 in 3M’s Current Report on Form 8-K dated May 4, 2017 (which updated 3M’s 2016 Annual Report on Form 10-K) provides additional information the Company considers in determining the exchange rate used relative to its Venezuelan subsidiary as well as factors which could lead to its deconsolidation. The Company continues to monitor these circumstances. Changes in applicable exchange rates or exchange mechanisms may continue in the future. These changes could impact the rate of exchange applicable to remeasure the Company’s net monetary assets (liabilities) denominated in Venezuelan Bolivars (VEF). As of June 30, 2017, the Company had a balance of net monetary assets denominated in VEF of less than 5 billion VEF and the DIPRO and DICOM exchange rates were approximately 10 VEF and 2,600 VEF per U.S. dollar, respectively. A need to deconsolidate the Company’s Venezuelan subsidiary’s operations may result from a lack of exchangeability of VEF-denominated cash coupled with an acute degradation in the ability to make key operational decisions due to government regulations in Venezuela. Based upon a review of factors as of June 30, 2017, the Company continues to consolidate its Venezuelan subsidiary. As of June 30, 2017, the balance of intercompany receivables due from this subsidiary and its equity balance were not significant. |
Reclassifications | Reclassifications Certain amounts in prior periods’ consolidated financial statements have been reclassified to conform to the current period presentation. |
Earnings Per Share | Earnings Per Share The difference in the weighted average 3M shares outstanding for calculating basic and diluted earnings per share attributable to 3M common shareholders is a result of the dilution associated with the Company’s stock-based compensation plans. Certain options outstanding under these stock-based compensation plans were not included in the computation of diluted earnings per share attributable to 3M common shareholders because they would not have had a dilutive effect (insignificant for the three months ended June 30, 2017; 1.6 million average options for the six months ended June 30, 2017; 2.9 million average options for the three months ended June 30, 2016; and 5.9 million average options for the six months ended June 30, 2016). The computations for basic and diluted earnings per share follow: Earnings Per Share Computations Three months ended Six months ended June 30, June 30, (Amounts in millions, except per share amounts) 2017 2016 2017 2016 Numerator: Net income attributable to 3M $ $ $ $ Denominator: Denominator for weighted average 3M common shares outstanding – basic Dilution associated with the Company’s stock-based compensation plans 14.7 14.0 14.3 13.9 Denominator for weighted average 3M common shares outstanding – diluted 612.8 612.4 Earnings per share attributable to 3M common shareholders – basic $ 2.65 $ 2.13 $ 4.86 $ 4.23 Earnings per share attributable to 3M common shareholders – diluted $ 2.58 $ 2.08 $ 4.74 $ 4.13 |
New Accounting Pronouncements | New Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers , and in August 2015 issued ASU No. 2015-14, which amended the standard as to effective date. The ASU provides a single comprehensive model to be used in the accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The standard’s stated core principle is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle the ASU includes provisions within a five step model that includes identifying the contract with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations, and recognizing revenue when (or as) an entity satisfies a performance obligation. The standard also specifies the accounting for some costs to obtain or fulfill a contract with a customer and requires expanded disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. During 2016, the FASB also issued ASU No. 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net) ; ASU No. 2016-10, Identifying Performance Obligations and Licensing ; ASU No. 2016-12, Narrow-Scope Improvements and Practical Expedients , and ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers which amend ASU No. 2014-09. These amendments include clarification of principal versus agent guidance in situations in which a revenue transaction involves a third party in providing goods or services to a customer. In such circumstances, an entity must determine whether the nature of its promise to the customer is to provide the underlying goods or services (i.e., the entity is the principal in the transaction) or to arrange for the third party to provide the underlying goods or services (i.e., the entity is the agent in the transaction). The amendments clarify, in terms of identifying performance obligations, how entities would determine whether promised goods or services are separately identifiable from other promises in a contract and, therefore, would be accounted for separately. The guidance allows entities to disregard goods or services that are immaterial in the context of a contract and provides an accounting policy election to account for shipping and handling activities as fulfillment costs rather than as additional promised services. With regard to the licensing, the amendments clarify how an entity would evaluate the nature of its promise in granting a license of intellectual property, which determines whether the entity recognizes revenue over time or at a point in time. The amendments also address implementation issues relative to transition (adding a practical expedient for contract modifications and clarifying what constitutes a completed contract when employing full or modified retrospective transition methods), collectability, noncash consideration, and the presentation of sales and other similar-type taxes (allowing entities to exclude sales-type taxes collected from transaction price). Finally, the amendments make certain technical corrections and provide additional guidance in the areas of disclosure of performance obligations, provisions for losses on certain types of contracts, scoping, and other areas. Overall, ASU No. 2014-09, as amended, provides for either full retrospective adoption or a modified retrospective adoption by which it is applied only to the most current period presented. For 3M, the ASU is effective January 1, 2018. The Company is continuing to evaluate the standard’s impact on 3M’s consolidated results of operations and financial condition. 3M has conducted initial analyses, developed project management relative to the process of adopting this ASU, and is currently completing detailed contract reviews to determine necessary adjustments to existing accounting policies and to support an evaluation of the standard’s impact on the Company’s consolidated results of operations and financial condition. For the majority of 3M’s revenue arrangements, no significant impacts are expected as these transactions are not accounted for under industry-specific guidance that will be superseded by the ASU and generally consist of a single performance obligation to transfer promised goods or services. However, in addition to expanded disclosures regarding revenue, the ASU could, for example, impact the timing of revenue recognition in some arrangements for which software industry-specific guidance (which the ASU supersedes) is presently utilized. The Company currently anticipates utilizing the modified retrospective method of adoption on January 1, 2018. In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory , which modified previous requirements regarding measuring inventory at the lower of cost or market. Under previous standards, the market amount required consideration of replacement cost, net realizable value (NRV), and NRV less an approximately normal profit margin. The new ASU replaced market with NRV, defined as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. This eliminated the need to determine and consider replacement cost or NRV less an approximately normal profit margin when measuring inventory. 3M adopted this standard prospectively beginning January 1, 2017. The adoption did not have a material impact on 3M’s consolidated results of operations and financial condition. In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities , which revises the accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. The ASU also amends certain disclosure requirements associated with the fair value of financial instruments. The new guidance requires the fair value measurement of investments in equity securities and other ownership interests in an entity, including investments in partnerships, unincorporated joint ventures and limited liability companies (collectively, equity securities) that do not result in consolidation and are not accounted for under the equity method. Entities will need to measure these investments and recognize changes in fair value in net income. Entities will no longer be able to recognize unrealized holding gains and losses on equity securities they classify under current guidance as available for sale in other comprehensive income (OCI). They also will no longer be able to use the cost method of accounting for equity securities that do not have readily determinable fair values. Instead, for these types of equity investments that do not otherwise qualify for the net asset value practical expedient, entities will be permitted to elect a practicability exception and measure the investment at cost less impairment plus or minus observable price changes (in orderly transactions). The ASU also establishes an incremental recognition and disclosure requirement related to the presentation of fair value changes of financial liabilities for which the fair value option (FVO) has been elected. Under this guidance, an entity would be required to separately present in OCI the portion of the total fair value change attributable to instrument-specific credit risk as opposed to reflecting the entire amount in earnings. For derivative liabilities for which the FVO has been elected, however, any changes in fair value attributable to instrument-specific credit risk would continue to be presented in net income, which is consistent with current guidance. For 3M, this standard is effective beginning January 1, 2018 via a cumulative-effect adjustment to beginning retained earnings, except for guidance relative to equity securities without readily determinable fair values which is applied prospectively. The Company is currently assessing this ASU’s impact on 3M’s consolidated results of operations and financial condition, however, 3M has historically held limited amounts of equity securities and cost method investments (less than $75 million in aggregate at June 30, 2017), and has not elected the FVO with respect to material financial liabilities. In February 2016, the FASB issued ASU No. 2016-02, Leases , replacing existing lease accounting guidance. The new standard introduces a lessee model that would require entities to recognize assets and liabilities for most leases, but recognize expenses on their income statements in a manner similar to current accounting. The ASU does not make fundamental changes to existing lessor accounting. However, it modifies what qualifies as a sales-type and direct financing lease and related accounting and aligns a number of the underlying principles with those of the new revenue standard, ASU No. 2014-09, such as evaluating how collectability should be considered and determining when profit can be recognized. The guidance eliminates existing real estate-specific provisions and requires expanded qualitative and quantitative disclosures. The standard requires modified retrospective transition by which it is applied at the beginning of the earliest comparative period presented in the year of adoption. For 3M, the ASU is effective January 1, 2019. Information under existing lease guidance with respect to rent expense for operating leases and the Company’s minimum lease payments for capital and operating leases with non-cancelable terms in excess of one year as of December 31, 2016 is included in Note 14 in 3M’s Current Report on Form 8-K dated May 4, 2017 (which updated 3M’s 2016 Annual Report on Form 10-K). The Company is currently assessing this ASU’s impact on 3M’s consolidated results of operations and financial condition. In March 2016, the FASB issued ASU No. 2016-06, Contingent Put and Call Options in Debt Instruments . This ASU clarified guidance used to determine if debt instruments that contain contingent put or call options require separation of the embedded put or call feature from the debt instrument and trigger accounting for the feature as a derivative with changes in fair value recorded through income. Under the new guidance, fewer put or call options embedded in debt instruments require derivative accounting. For 3M, this ASU was effective January 1, 2017. The Company’s outstanding debt with embedded put provisions did not require separate derivative accounting under previous guidance. As a result, the adoption of this standard did not have a material impact on the Company’s consolidated results of operations and financial condition. In March 2016, the FASB issued ASU No. 2016-07, Simplifying the Transition to the Equity Method of Accounting , which eliminated the previous requirement to apply the equity method of accounting retrospectively (revising prior periods as if the equity method had always been applied) when an entity obtained significant influence over a previously held investment. The new guidance requires the investor to apply the equity method prospectively from the date the investment qualifies for the equity method. The investor would add the carrying value of the existing investment to the cost of any additional investment to determine the initial cost basis of the equity method investment. For 3M, this ASU was effective January 1, 2017 on a prospective basis, with early adoption permitted. 3M will apply this guidance to investments that transition to the equity method after the adoption date. In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments , which revises guidance for the accounting for credit losses on financial instruments within its scope. The new standard introduces an approach, based on expected losses, to estimate credit losses on certain types of financial instruments and modifies the impairment model for available-for-sale debt securities. The new approach to estimating credit losses (referred to as the current expected credit losses model) applies to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt securities, net investments in leases and off-balance-sheet credit exposures. With respect to available-for-sale (AFS) debt securities, the ASU amends the current other-than-temporary impairment model. For such securities with unrealized losses, entities will still consider if a portion of any impairment is related only to credit losses and therefore recognized as a reduction in income. However, rather than also reflecting that credit loss amount as a permanent reduction in cost (amortized cost) basis of that AFS debt security, the ASU requires that credit losses be reflected as an allowance. As a result, under certain circumstances, a recovery in value could result in previous allowances, or portions thereof, reversing back into income. For 3M, this ASU is effective January 1, 2020, with early adoption permitted. Entities are required to apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company is currently assessing this ASU’s impact on 3M’s consolidated results of operations and financial condition. In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments, which was intended to reduce diversity in practice in how certain cash receipts and payments are presented and classified in the statement of cash flows. The standard provided guidance in a number of situations including, among others, settlement of zero-coupon bonds, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, and distributions received from equity method investees. The ASU also provided guidance for classifying cash receipts and payments that have aspects of more than one class of cash flows. For 3M, this ASU is effective January 1, 2018, with early adoption permitted. The Company early adopted ASU No. 2016-15 as of January 1, 2017. Since the associated changes in classification were immaterial to all prior periods presented, no impact was reflected in the Company’s pre-2017 consolidated results of operations and financial condition presented. In October 2016, the FASB issued ASU No. 2016-16, Intra-Entity Transfers of Assets Other Than Inventory , which modifies existing guidance and is intended to reduce diversity in practice with respect to the accounting for the income tax consequences of intra-entity transfers of assets. The ASU indicates that the current exception to income tax accounting that requires companies to defer the income tax effects of certain intercompany transactions would apply only to intercompany inventory transactions. That is, the exception would no longer apply to intercompany sales and transfers of other assets (e.g., intangible assets). Under the existing exception, income tax expense associated with intra-entity profits in an intercompany sale or transfer of assets is eliminated from earnings. Instead, that cost is deferred and recorded on the balance sheet (e.g., as a prepaid asset) until the assets leave the consolidated group. Similarly, the entity is prohibited from recognizing deferred tax assets for the increases in tax bases due to the intercompany sale or transfer. For 3M, this ASU is effective January 1, 2018, with early adoption permitted as of January 1, 2017. The standard requires modified retrospective transition with a cumulative catch-up adjustment to opening retained earnings in the period of adoption. Upon adoption, a company would write off any income tax effects that had been deferred from past intercompany transactions involving non-inventory assets to opening retained earnings. In addition, an entity would record deferred tax assets with an offset to opening retained earnings for amounts that entity had previously not recognized under existing guidance but would recognize under the new guidance. While 3M could initiate additional relevant transactions prior to this ASU’s adoption date, based on deferred tax amounts related to applicable past intercompany transactions as of December 31, 2016, the Company does not expect this ASU to have a material impact on 3M’s consolidated results of operations and financial condition. In October 2016, the FASB issued ASU No. 2016-17, Interests Held through Related Parties That Are under Common Control , which modified previous guidance with respect to how a decision maker that holds an indirect interest in a variable interest entity (VIE) through a common control party determines whether it is the primary beneficiary of the VIE as part of the analysis of whether the VIE would need to be consolidated. Under the ASU, a decision maker would need to consider only its proportionate indirect interest in the VIE held through a common control party. Previous guidance had required the decision maker to treat the common control party’s interest in the VIE as if the decision maker held the interest itself. As a result of the ASU, in certain cases, previous consolidation conclusions may change. For 3M, the standard was effective January 1, 2017 with retrospective application to January 1, 2016. 3M does not have significant involvement with entities subject to consolidation considerations impacted by VIE model factors. As a result, the adoption of this ASU did not have a material impact on the Company’s consolidated results of operations and financial condition. In November 2016, the FASB issued ASU No. 2016-18, Restricted Cash , which clarified guidance on the classification and presentation of restricted cash in the statement of cash flows. Under the ASU, changes in restricted cash and restricted cash equivalents would be included along with those of cash and cash equivalents in the statement of cash flows. As a result, entities would no longer present transfers between cash/equivalents and restricted cash/equivalents in the statement of cash flows. In addition, a reconciliation between the balance sheet and the statement of cash flows would be disclosed when the balance sheet includes more than one line item for cash/equivalents and restricted cash/equivalents. For 3M, this ASU is effective January 1, 2018, with early adoption permitted. The Company early adopted ASU No. 2016-18 as of January 1, 2017. Due to the immaterial use of restricted cash and restricted cash equivalents, no impact was reflected in the Company’s pre-2017 consolidated results of operations and financial condition presented. In January 2017, the FASB issued ASU No. 2017-01, Clarifying the Definition of a Business , which narrows the existing definition of a business and provides a framework for evaluating whether a transaction should be accounted for as an acquisition (or disposal) of assets or a business. The ASU requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set of transferred assets and activities (collectively, the set) is not a business. To be considered a business, the set would need to include an input and a substantive process that together significantly contribute to the ability to create outputs. The standard also narrows the definition of outputs. The definition of a business affects areas of accounting such as acquisitions, disposals and goodwill. Under the new guidance, fewer acquired sets are expected to be considered businesses. For 3M, this ASU is effective January 1, 2018 on a prospective basis with early adoption permitted. 3M would apply this guidance to applicable transactions after the adoption date. In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment . Under the new standard, goodwill impairment would be measured as the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying value of goodwill. This ASU eliminates existing guidance that requires an entity to determine goodwill impairment by calculating the implied fair value of goodwill by hypothetically assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. For 3M, this ASU is effective prospectively to impairment tests beginning January 1, 2020, with early adoption permitted. 3M currently plans to apply this ASU in the fourth quarter of 2017 in conjunction with its annual goodwill impairment testing. In February 2017, the FASB issued ASU No. 2017-05, Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets . This ASU addresses scope-related questions that arose after the FASB issued its revenue guidance in ASU No. 2014-09, Revenue from Contracts with Customers . The new standard clarifies the accounting for derecognition of nonfinancial assets and defines what is considered an in substance nonfinancial asset. Nonfinancial assets largely relate to items such as real estate, ships and intellectual property that do not constitute a business. The new ASU impacts entities derecognizing (e.g. selling) nonfinancial assets (or in substance nonfinancial assets), including partial interests therein, when the purchaser is not a customer. Under the new guidance, the seller would apply certain recognition and measurement principles of ASU No. 2014-09, Revenue from Contracts with Customers , even though the purchaser is not a customer. For 3M, this new standard is effective coincident with the Company’s January 1, 2018 adoption of ASU No. 2014-09. The Company is currently assessing this ASU’s impact on 3M’s consolidated results of operations and financial condition. In March 2017, the FASB issued ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost . This ASU changes how employers that sponsor defined benefit pension and/or other postretirement benefit plans present the net periodic benefit cost in the income statement. Under the new standard, only the service cost component of net periodic benefit cost would be included in operating expenses and only the service cost component would be eligible for capitalization into assets such as inventory. All other net periodic benefit costs components (such as interest, expected return on plan assets, prior service cost amortization and actuarial gain/loss amortization) would essentially be reported outside of operating income. For 3M, this ASU is effective January 1, 2018 on a retrospective basis; however, guidance limiting the capitalization to only the service cost component is applied on prospective basis. The components of 3M’s net periodic defined benefit pension and postretirement benefit costs are presented in Note 9. These include components totaling a benefit of $32 million and $54 million for the three months ended June 30, 2017 and 2016, respectively, and $64 million and $106 million for the six months ended June 30, 2017 and 2016, respectively, that would no longer be included within operating expenses and instead would be reported outside of income from operations under the new standard. In March 2017, the FASB issued ASU No. 2017-08 , Premium Amortization on Purchased Callable Debt Securities , which amends the amortization period for certain purchased callable debt securities held at a premium. Under existing standards, entities generally amortize the premium as an adjustment of yield over the contractual life of the instrument. The new guidance shortens the amortization period to the earliest call date for certain callable debt securities that have explicit, noncontingent call features and are callable at a fixed price and preset date. The amendments do not require an accounting change for securities held at a discount. For 3M, this ASU is effective January 1, 2019 with a modified retrospective transition resulting in a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. Early adoption is permitted. 3M’s marketable security portfolio includes very limited instances of callable debt securities held at a premium. As a result, the Company does not expect this ASU to have a material impact on 3M’s consolidated results of operations and financial condition. In May 2017, the FASB issued ASU No. 2017-09 , Scope of Modification Accounting , that clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as a modification. The general model for accounting for modifications of share-based payment awards is to record the incremental value arising from the changes as additional compensation cost. Under the new standard, fewer changes to the terms of an award would require accounting under this modification model. For 3M, this ASU is effective January 1, 2018, with early adoption permitted. Because the Company does not typically make changes to the terms or conditions of its issued share-based payment awards, 3M does not expect this ASU to have a material impact on its consolidated results of operations and financial condition. In May 2017, the FASB issued ASU No. 2017-10, Determining the Customer of the Operation Services , that clarifies how an operating entity determines the customer of the operation services for transactions within the scope of a service concession arrangement. Service concession arrangements are typically agreements between a grantor and an operating entity whereby the operating entity will operate the grantor’s infrastructure (i.e. airports, roadways, bridges, and prisons) for a specified period of time. The operating entity also may be required to maintain the infrastructure and provide capital-intensive maintenance to enhance or extend its life. In such arrangements, typically the operation services (i.e. operation and maintenance of a roadway) would be used by third parties (i.e. drivers). The ASU clarifies that the grantor, not the third party, is the customer of the operation services in such arrangements. For 3M, this new standard is effective coincident with the Company’s January 1, 2018 adoption of ASU No. 2014-09. Because the Company is not typically a party to agreements within the scope of accounting for service concession arrangements, 3M does not expect this ASU to have a material impact on its consolidated results of operations and financial condition. In July 2017, the FASB issued ASU No. 2017-11, (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception . The new standard applies to issuers of financial instruments with down-round features. A down-round provision is a term in an equity-linked financial instrument (i.e. a freestanding warrant contract or an equity conversion feature embedded within a host debt or equity contract) that triggers a downward adjustment to the instrument’s strike price (or conversion price) if equity shares are issued at a lower price (or equity-linked financial instruments are issued at a lower strike price) than the instrument’s then-current strike price. The purpose of the feature is typically to protect the instrument’s counterparty from future issuances of equity shares at a more favorable price. The ASU amends (1) the classification of such instruments as liabilities or equity by revising the certain guidance relative to evaluating if they must be accounted for as derivative instruments and (2) the guidance on recognition and measurement of freestanding equity-classified instruments. For 3M, this ASU is effective January 1, 2019, with early adoption permitted. Because the Company has not issued financial instruments with down-round features, 3M does not expect this ASU to have a material impact on its consolidated results of operations and financial condition. |
Significant Accounting Polici22
Significant Accounting Policies (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Significant Accounting Policies | |
Earnings per share | Earnings Per Share Computations Three months ended Six months ended June 30, June 30, (Amounts in millions, except per share amounts) 2017 2016 2017 2016 Numerator: Net income attributable to 3M $ $ $ $ Denominator: Denominator for weighted average 3M common shares outstanding – basic Dilution associated with the Company’s stock-based compensation plans 14.7 14.0 14.3 13.9 Denominator for weighted average 3M common shares outstanding – diluted 612.8 612.4 Earnings per share attributable to 3M common shareholders – basic $ 2.65 $ 2.13 $ 4.86 $ 4.23 Earnings per share attributable to 3M common shareholders – diluted $ 2.58 $ 2.08 $ 4.74 $ 4.13 |
Acquisitions and Divestitures (
Acquisitions and Divestitures (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Acquisitions | |
Approximate amounts of major assets and liabilities associated with disposal groups classified as held-for-sale | December 31, (Millions) 2016 Accounts receivable $ 25 Property, plant and equipment (net) 25 Intangible assets 35 Deferred revenue (other current liabilities) 35 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Goodwill and Intangible Assets | |
Goodwill | Goodwill December 31, 2016 Acquisition Divestiture Translation June 30, 2017 (Millions) Balance activity activity and other Balance Industrial $ 2,536 $ — $ — $ 93 $ 2,629 Safety and Graphics 3,324 — (276) 54 3,102 Health Care 1,609 — — 41 1,650 Electronics and Energy 1,489 — — 26 1,515 Consumer 208 — — 1 209 Total Company $ 9,166 $ — $ (276) $ 215 $ 9,105 |
Acquired Intangible Assets | Acquired Intangible Assets The carrying amount and accumulated amortization of acquired finite-lived intangible assets, in addition to the balance of non-amortizable intangible assets, as of June 30, 2017, and December 31, 2016, follow: June 30, December 31, (Millions) 2017 2016 Customer related intangible assets $ 1,900 $ 1,939 Patents 585 602 Other technology-based intangible assets 475 524 Definite-lived tradenames 392 420 Other amortizable intangible assets 209 211 Total gross carrying amount $ 3,561 $ 3,696 Accumulated amortization — customer related (818) (797) Accumulated amortization — patents (494) (497) Accumulated amortization — other technology based (284) (302) Accumulated amortization — definite-lived tradenames (231) (236) Accumulated amortization — other (173) (173) Total accumulated amortization $ (2,000) $ (2,005) Total finite-lived intangible assets — net $ 1,561 $ 1,691 Non-amortizable intangible assets (primarily tradenames) 640 629 Total intangible assets — net $ 2,201 $ 2,320 |
Schedule of amortization expense for acquired intangible assets | Amortization expense for acquired intangible assets for the three and six months ended June 30, 2017 and 2016 follows: Three months ended Six months ended June 30, June 30, (Millions) 2017 2016 2017 2016 Amortization expense $ 47 $ 66 $ 111 $ 132 |
Schedule of expected amortization expense for acquired amortizable intangible assets | Expected amortization expense for acquired amortizable intangible assets recorded as of June 30, 2017: Remainder of After (Millions) 2017 2018 2019 2020 2021 2022 2022 Amortization expense $ 118 $ 190 $ 181 $ 172 $ 160 $ 147 $ 593 |
Restructuring Actions and Exi25
Restructuring Actions and Exit Activities (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Restructuring and Related Activities [Abstract] | |
Components of restructuring by business segment | Components of these restructuring charges are summarized by business segment as follows: Second Quarter 2017 (Millions) Employee-Related Industrial $ 39 Safety and Graphics 9 Health Care 2 Electronics and Energy 7 Consumer 36 Corporate and Unallocated 6 Total Expense $ 99 |
Schedule of restructuring charges by income statement line | The preceding restructuring charges were recorded in the income statement as follows: (Millions) Second Quarter 2017 Cost of sales 86 Selling, general and administrative expenses 5 Research, development and related expenses 8 Total $ 99 |
Accrued restructuring action balances | Components of these restructuring actions, follow: (Millions) Employee-Related Expense incurred $ 99 Accrued restructuring action balances as of June 30, 2017 $ 99 |
Supplemental Equity and Compr26
Supplemental Equity and Comprehensive Income Information (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Supplemental Equity and Comprehensive Income Information | |
Consolidated Statement of Changes in Equity | Consolidated Statement of Changes in Equity Three months ended June 30, 2017 3M Company Shareholders Common Accumulated Stock and Other Additional Comprehensive Non- Paid-in Retained Treasury Income controlling (Millions) Total Capital Earnings Stock (Loss) Interest Balance at March 31, 2017 $ 11,040 $ 5,198 $ 38,094 $ (25,354) $ (6,949) $ 51 Net income 1,585 1,583 2 Other comprehensive income (loss), net of tax: Cumulative translation adjustment (67) (67) — Defined benefit pension and post-retirement plans adjustment 78 78 — Cash flow hedging instruments - unrealized gain (loss) (51) (51) — Total other comprehensive income (loss), net of tax (40) Dividends declared (701) (701) Stock-based compensation 55 55 Reacquired stock (475) (475) Issuances pursuant to stock option and benefit plans 180 (183) 363 Balance at June 30, 2017 $ 11,644 $ 5,253 $ 38,793 $ (25,466) $ (6,989) $ 53 Six months ended June 30, 2017 3M Company Shareholders Common Accumulated Stock and Other Additional Comprehensive Non- Paid-in Retained Treasury Income controlling (Millions) Total Capital Earnings Stock (Loss) Interest Balance at December 31, 2016 $ 10,343 $ 5,070 $ 37,907 $ (25,434) $ (7,245) $ 45 Net income 2,911 2,906 5 Other comprehensive income (loss), net of tax: Cumulative translation adjustment 225 222 3 Defined benefit pension and post-retirement plans adjustment 161 161 — Cash flow hedging instruments - unrealized gain (loss) (127) (127) — Total other comprehensive income (loss), net of tax 259 Dividends declared (1,403) (1,403) Stock-based compensation 183 183 Reacquired stock (1,153) (1,153) Issuances pursuant to stock option and benefit plans 504 (617) 1,121 Balance at June 30, 2017 $ 11,644 $ 5,253 $ 38,793 $ (25,466) $ (6,989) $ 53 Three months ended June 30, 2016 3M Company Shareholders Common Accumulated Stock and Other Additional Comprehensive Non- Paid-in Retained Treasury Income controlling (Millions) Total Capital Earnings Stock (Loss) Interest Balance at March 31, 2016 $ 11,495 $ 4,925 $ 36,506 $ (23,716) $ (6,261) $ 41 Net income 1,293 1,291 2 Other comprehensive income (loss), net of tax: Cumulative translation adjustment 37 37 — Defined benefit pension and post-retirement plans adjustment 67 67 — Cash flow hedging instruments - unrealized gain (loss) (27) (27) — Total other comprehensive income (loss), net of tax 77 Dividends declared (672) (672) Stock-based compensation 47 47 Reacquired stock (837) (837) Issuances pursuant to stock option and benefit plans 255 (210) 465 Balance at June 30, 2016 $ 11,658 $ 4,972 $ 36,915 $ (24,088) $ (6,184) $ 43 Six months ended June 30, 2016 3M Company Shareholders Common Accumulated Stock and Other Additional Comprehensive Non- Paid-in Retained Treasury Income controlling (Millions) Total Capital Earnings Stock (Loss) Interest Balance at December 31, 2015 $ 11,468 $ 4,800 $ 36,296 $ (23,308) $ (6,359) $ 39 Net income 2,571 2,566 5 Other comprehensive income (loss), net of tax: Cumulative translation adjustment 175 176 (1) Defined benefit pension and post-retirement plans adjustment 136 136 — Cash flow hedging instruments - unrealized gain (loss) (137) (137) — Total other comprehensive income (loss), net of tax 174 Dividends declared (1,344) (1,344) Stock-based compensation 172 172 Reacquired stock (2,000) (2,000) Issuances pursuant to stock option and benefit plans 617 (603) 1,220 Balance at June 30, 2016 $ 11,658 $ 4,972 $ 36,915 $ (24,088) $ (6,184) $ 43 |
Changes in Accumulated Other Comprehensive Income (Loss) Attributable to 3M | Changes in Accumulated Other Comprehensive Income (Loss) Attributable to 3M by Component Three months ended June 30, 2017 Total Defined Benefit Cash Flow Accumulated Pension and Hedging Other Cumulative Postretirement Instruments, Comprehensive Translation Plans Unrealized Income (Millions) Adjustment Adjustment Gain (Loss) (Loss) Balance at March 31, 2017, net of tax: $ (1,719) $ (5,245) $ 15 $ (6,949) Other comprehensive income (loss), before tax: Amounts before reclassifications (167) — (74) (241) Amounts reclassified out — 119 (5) 114 Total other comprehensive income (loss), before tax (167) 119 (79) (127) Tax effect 100 (41) 28 87 Total other comprehensive income (loss), net of tax (67) 78 (51) (40) Balance at June 30, 2017, net of tax: $ (1,786) $ (5,167) $ (36) $ (6,989) Six months ended June 30, 2017 Total Defined Benefit Cash Flow Accumulated Pension and Hedging Other Cumulative Postretirement Instruments, Comprehensive Translation Plans Unrealized Income (Millions) Adjustment Adjustment Gain (Loss) (Loss) Balance at December 31, 2016, net of tax: $ (2,008) $ (5,328) $ 91 $ (7,245) Other comprehensive income (loss), before tax: Amounts before reclassifications 59 — (175) (116) Amounts reclassified out — 238 (23) 215 Total other comprehensive income (loss), before tax 59 238 (198) 99 Tax effect 163 (77) 71 157 Total other comprehensive income (loss), net of tax 222 161 (127) 256 Balance at June 30, 2017, net of tax: $ (1,786) $ (5,167) $ (36) $ (6,989) Three months ended June 30, 2016 Total Defined Benefit Cash Flow Accumulated Pension and Hedging Other Cumulative Postretirement Instruments, Comprehensive Translation Plans Unrealized Income (Millions) Adjustment Adjustment Gain (Loss) (Loss) Balance at March 31, 2016, net of tax: $ (1,540) $ (4,735) $ 14 $ (6,261) Other comprehensive income (loss), before tax: Amounts before reclassifications 59 — (15) 44 Amounts reclassified out — 101 (28) 73 Total other comprehensive income (loss), before tax 59 101 (43) 117 Tax effect (22) (34) 16 (40) Total other comprehensive income (loss), net of tax 37 67 (27) 77 Balance at June 30, 2016, net of tax: $ (1,503) $ (4,668) $ (13) $ (6,184) Six months ended June 30, 2016 Total Defined Benefit Cash Flow Accumulated Pension and Hedging Other Cumulative Postretirement Instruments, Comprehensive Translation Plans Unrealized Income (Millions) Adjustment Adjustment Gain (Loss) (Loss) Balance at December 31, 2015, net of tax: $ (1,679) $ (4,804) $ 124 $ (6,359) Other comprehensive income (loss), before tax: Amounts before reclassifications 119 — (136) (17) Amounts reclassified out — 204 (80) 124 Total other comprehensive income (loss), before tax 119 204 (216) 107 Tax effect 57 (68) 79 68 Total other comprehensive income (loss), net of tax 176 136 (137) 175 Balance at June 30, 2016, net of tax $ (1,503) $ (4,668) $ (13) $ (6,184) |
Reclassifications Out of Accumulated Other Comprehensive Income | Reclassifications out of Accumulated Other Comprehensive Income Attributable to 3M Amount Reclassified from Details about Accumulated Other Accumulated Other Comprehensive Income Comprehensive Income Components Three months ended June 30, Six months ended June 30, Location on Income (Millions) 2017 2016 2017 2016 Statement Gains (losses) associated with, defined benefit pension and postretirement plans amortization Transition asset $ — $ 1 $ — $ 1 See Note 9 Prior service benefit 22 24 44 47 See Note 9 Net actuarial loss (141) (126) (282) (252) See Note 9 Total before tax (119) (101) (238) (204) Tax effect 41 34 77 68 Provision for income taxes Net of tax $ (78) $ (67) $ (161) $ (136) Cash flow hedging instruments gains (losses) Foreign currency forward/option contracts $ 5 $ 28 $ 23 $ 81 Cost of sales Interest rate swap contracts — — — (1) Interest expense Total before tax 5 28 23 80 Tax effect (2) (11) (8) (29) Provision for income taxes Net of tax $ 3 $ 17 $ 15 $ 51 Total reclassifications for the period, net of tax $ (75) $ (50) $ (146) $ (85) |
Marketable Securities (Tables)
Marketable Securities (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Marketable Securities | |
Schedule of Marketable Securities | June 30, December 31, (Millions) 2017 2016 Corporate debt securities $ 10 $ 10 Commercial paper 37 14 Certificates of deposit/time deposits 53 197 U.S. municipal securities 3 3 Asset-backed securities: Automobile loan related 28 31 Credit card related 9 18 Other — 7 Asset-backed securities total 37 56 Current marketable securities $ 140 $ 280 U.S. municipal securities $ 17 $ 17 Non-current marketable securities $ 17 $ 17 Total marketable securities $ 157 $ 297 |
Marketable securities by contractual maturity | (Millions) June 30, 2017 Due in one year or less $ 104 Due after one year through five years 49 Due after five years through ten years 4 Total marketable securities $ 157 |
Pension and Postretirement Be28
Pension and Postretirement Benefit Plans (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Pension and Postretirement Benefit Plans | |
Components of net periodic benefit cost (benefit) | Benefit Plan Information Three months ended June 30, Qualified and Non-qualified Pension Benefits Postretirement United States International Benefits (Millions) 2017 2016 2017 2016 2017 2016 Net periodic benefit cost (benefit) Service cost $ 67 $ 65 $ 34 $ 34 $ 12 $ 14 Interest cost 142 144 37 43 20 19 Expected return on plan assets (259) (261) (70) (78) (21) (22) Amortization of transition (asset) obligation — — — (1) — — Amortization of prior service cost (benefit) (6) (6) (3) (4) (13) (14) Amortization of net actuarial (gain) loss 97 88 30 23 14 15 Settlements, curtailments, special termination benefits and other — — — — — — Net periodic benefit cost (benefit) after settlements, curtailments, special termination benefits and other $ 41 $ 30 $ 28 $ 17 $ 12 $ 12 Six months ended June 30, Qualified and Non-qualified Pension Benefits Postretirement United States International Benefits (Millions) 2017 2016 2017 2016 2017 2016 Net periodic benefit cost (benefit) Service cost $ 134 $ 130 $ 67 $ 67 $ 25 $ 27 Interest cost 284 287 74 86 39 39 Expected return on plan assets (518) (521) (139) (156) (42) (45) Amortization of transition (asset) obligation — — — (1) — — Amortization of prior service cost (benefit) (12) (12) (6) (7) (26) (28) Amortization of net actuarial (gain) loss 194 176 60 45 28 31 Settlements, curtailments, special termination benefits and other — — — — — — Net periodic benefit cost (benefit) after settlements, curtailments, special termination benefits and other $ 82 $ 60 $ 56 $ 34 $ 24 $ 24 |
Derivatives (Tables)
Derivatives (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Derivatives | |
Gain (loss) on derivative instruments designated as cash flow hedges | The location in the consolidated statements of income and comprehensive income and amounts of gains and losses related to derivative instruments designated as cash flow hedges are provided in the following table. Pretax Gain (Loss) Recognized in Pretax Gain (Loss) Income on Effective Portion of Ineffective Portion of Gain Recognized in Other Derivative as a Result of (Loss) on Derivative and Comprehensive Reclassification from Amount Excluded from Income on Effective Accumulated Other Effectiveness Testing Three months ended June 30, 2017 Portion of Derivative Comprehensive Income Recognized in Income (Millions) Amount Location Amount Location Amount Foreign currency forward/option contracts $ (72) Cost of sales $ 5 Cost of sales $ — Interest rate swap contracts (2) Interest expense — Interest expense — Total $ (74) $ 5 $ — Six months ended June 30, 2017 Portion of Derivative Comprehensive Income Recognized in Income (Millions) Amount Location Amount Location Amount Foreign currency forward/option contracts $ (172) Cost of sales $ 23 Cost of sales $ — Interest rate swap contracts (3) Interest expense — Interest expense — Total $ (175) $ 23 $ — Three months ended June 30, 2016 Portion of Derivative Comprehensive Income Recognized in Income (Millions) Amount Location Amount Location Amount Foreign currency forward/option contracts $ (11) Cost of sales $ 28 Cost of sales $ — Interest rate swap contracts (4) Interest expense — Interest expense — Total $ (15) $ 28 $ — Six months ended June 30, 2016 Portion of Derivative Comprehensive Income Recognized in Income (Millions) Amount Location Amount Location Amount Foreign currency forward/option contracts $ (131) Cost of sales $ 81 Cost of sales $ — Interest rate swap contracts (5) Interest expense (1) Interest expense — Total $ (136) $ 80 $ — |
Gain (loss) on derivative instruments designated as fair value hedges | The location in the consolidated statements of income and amounts of gains and losses related to derivative instruments designated as fair value hedges and similar information relative to the hedged items are as follows: Gain (Loss) on Derivative Gain (Loss) on Hedged Item Three months ended June 30, 2017 Recognized in Income Recognized in Income (Millions) Location Amount Location Amount Interest rate swap contracts Interest expense $ 1 Interest expense $ (1) Total $ 1 $ (1) Six months ended June 30, 2017 (Millions) Location Amount Location Amount Interest rate swap contracts Interest expense $ (4) Interest expense $ 4 Total $ (4) $ 4 Three months ended June 30, 2016 (Millions) Location Amount Location Amount Interest rate swap contracts Interest expense $ 5 Interest expense $ (5) Total $ 5 $ (5) Six months ended June 30, 2016 (Millions) Location Amount Location Amount Interest rate swap contracts Interest expense $ 34 Interest expense $ (34) Total $ 34 $ (34) |
Gain (loss) on derivative and non-derivative instruments designated as net investment hedges | The location in the consolidated statements of income and comprehensive income and amounts of gains and losses related to derivative and nonderivative instruments designated as net investment hedges are as follows. There were no reclassifications of the effective portion of net investment hedges out of accumulated other comprehensive income into income for the periods presented in the table below. Pretax Gain (Loss) Recognized as Cumulative Translation within Other Ineffective Portion of Gain (Loss) on Comprehensive Income Instrument and Amount Excluded on Effective Portion of from Effectiveness Testing Three months ended June 30, 2017 Instrument Recognized in Income (Millions) Amount Location Amount Foreign currency denominated debt $ (270) N/A $ — Foreign currency forward contracts (7) Cost of sales 3 Total $ (277) $ 3 Six months ended June 30, 2017 Comprehensive Income Instrument and Amount Excluded (Millions) Amount Location Amount Foreign currency denominated debt $ (391) N/A $ — Foreign currency forward contracts (27) Cost of sales 5 Total $ (418) $ 5 Three months ended June 30, 2016 Comprehensive Income Instrument and Amount Excluded (Millions) Amount Location Amount Foreign currency denominated debt $ 94 N/A $ — Foreign currency forward contracts 16 Cost of sales 3 Total $ 110 $ 3 Six months ended June 30, 2016 Comprehensive Income Instrument and Amount Excluded (Millions) Amount Location Amount Foreign currency denominated debt $ (50) N/A $ — Foreign currency forward contracts (27) Cost of sales 1 Total $ (77) $ 1 |
Gain (loss) on derivative instruments not designated as hedging instruments | The location in the consolidated statements of income and amounts of gains and losses related to derivative instruments not designated as hedging instruments are as follows: Three months ended June 30, 2017 Six months ended June 30, 2017 Gain (Loss) on Derivative Recognized in Gain (Loss) on Derivative Recognized in Income Income (Millions) Location Amount Location Amount Foreign currency forward/option contracts Cost of sales $ 6 Cost of sales $ 5 Foreign currency forward contracts Interest expense (138) Interest expense (96) Total $ (132) $ (91) Three months ended June 30, 2016 Six months ended June 30, 2016 Gain (Loss) on Derivative Recognized in Gain (Loss) on Derivative Recognized in Income Income (Millions) Location Amount Location Amount Foreign currency forward/option contracts Cost of sales $ (1) Cost of sales $ (6) Foreign currency forward contracts Interest expense 89 Interest expense 24 Total $ 88 $ 18 |
Location and Fair Value of Derivative Instruments | Gross Assets Liabilities June 30, 2017 Notional Fair Fair (Millions) Amount Location Value Amount Location Value Amount Derivatives designated as hedging instruments Foreign currency forward/option contracts $ 2,208 Other current assets $ 11 Other current liabilities $ 42 Foreign currency forward/option contracts 1,488 Other assets 32 Other liabilities 27 Interest rate swap contracts 590 Other current assets 2 Other current liabilities 4 Interest rate swap contracts 1,753 Other assets 22 Other liabilities 2 Total derivatives designated as hedging instruments $ 67 $ 75 Derivatives not designated as hedging instruments Foreign currency forward/option contracts $ 5,914 Other current assets $ 23 Other current liabilities $ 118 Total derivatives not designated as hedging instruments $ 23 $ 118 Total derivative instruments $ 90 $ 193 Gross Assets Liabilities December 31, 2016 Notional Fair Fair (Millions) Amount Location Value Amount Location Value Amount Derivatives designated as hedging instruments Foreign currency forward/option contracts $ 2,160 Other current assets $ 107 Other current liabilities $ 9 Foreign currency forward/option contracts 1,459 Other assets 86 Other liabilities 3 Interest rate swap contracts 1,953 Other assets 25 Other current liabilities 1 Total derivatives designated as hedging instruments $ 218 $ 13 Derivatives not designated as hedging instruments Foreign currency forward/option contracts $ 5,655 Other current assets $ 41 Other current liabilities $ 82 Total derivatives not designated as hedging instruments $ 41 $ 82 Total derivative instruments $ 259 $ 95 |
Offsetting Assets | Offsetting of Financial Assets under Master Netting Agreements with Derivative Counterparties Gross Amounts not Offset in the Consolidated Balance Sheet that are Subject Gross Amount of to Master Netting Agreements Derivative Assets Gross Amount of Presented in the Eligible Offsetting June 30, 2017 Consolidated Recognized Cash Collateral Net Amount of (Millions) Balance Sheet Derivative Liabilities Received Derivative Assets Derivatives subject to master netting agreements $ 90 $ 35 $ — $ 55 Derivatives not subject to master netting agreements — — Total $ 90 $ 55 December 31, 2016 (Millions) Derivatives subject to master netting agreements $ 259 $ 39 $ — $ 220 Derivatives not subject to master netting agreements — — Total $ 259 $ 220 |
Offsetting Liabilities | Offsetting of Financial Liabilities under Master Netting Agreements with Derivative Counterparties Gross Amounts not Offset in the Consolidated Balance Sheet that are Subject Gross Amount of to Master Netting Agreements Derivative Liabilities Gross Amount of Presented in the Eligible Offsetting June 30, 2017 Consolidated Recognized Cash Collateral Net Amount of (Millions) Balance Sheet Derivative Assets Pledged Derivative Liabilities Derivatives subject to master netting agreements $ 189 $ 35 $ — $ 154 Derivatives not subject to master netting agreements 4 4 Total $ 193 $ 158 December 31, 2016 (Millions) Derivatives subject to master netting agreements $ 93 $ 39 $ — $ 54 Derivatives not subject to master netting agreements 2 2 Total $ 95 $ 56 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Fair Value Measurements | |
Fair Value, Assets and Liabilities Measured on Recurring Basis | The following tables provide information by level for assets and liabilities that are measured at fair value on a recurring basis. Fair Value Measurements Description Fair Value at Using Inputs Considered as (Millions) June 30, 2017 Level 1 Level 2 Level 3 Assets: Available-for-sale: Marketable securities: Corporate debt securities $ 10 $ — $ 10 $ — Commercial paper 37 — 37 — Certificates of deposit/time deposits 53 — 53 — Asset-backed securities: Automobile loan related 28 — 28 — Credit card related 9 — 9 — U.S. municipal securities 20 — — 20 Derivative instruments — assets: Foreign currency forward/option contracts 66 — 66 — Interest rate swap contracts 24 — 24 — Liabilities: Derivative instruments — liabilities: Foreign currency forward/option contracts 187 — 187 — Interest rate swap contracts 6 — 6 — Fair Value Measurements Description Fair Value at Using Inputs Considered as (Millions) December 31, 2016 Level 1 Level 2 Level 3 Assets: Available-for-sale: Marketable securities: Corporate debt securities $ 10 $ — $ 10 $ — Commercial paper 14 — 14 — Certificates of deposit/time deposits 197 — 197 — Asset-backed securities: Automobile loan related 31 — 31 — Credit card related 18 — 18 — Other 7 — 7 — U.S. municipal securities 20 — — 20 Derivative instruments — assets: Foreign currency forward/option contracts 234 — 234 — Interest rate swap contracts 25 — 25 — Liabilities: Derivative instruments — liabilities: Foreign currency forward/option contracts 94 — 94 — Interest rate swap contracts 1 — 1 — |
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation | The following table provides a reconciliation of the beginning and ending balances of items measured at fair value on a recurring basis in the table above that used significant unobservable inputs (Level 3). Three months ended Six months ended Marketable securities — certain U.S. municipal securities only June 30, June 30, (Millions) 2017 2016 2017 2016 Beginning balance $ 20 $ 18 $ 20 $ 12 Total gains or losses: Included in earnings — — — — Included in other comprehensive income — — — — Purchases and issuances — — — 6 Sales and settlements — — — — Transfers in and/or out of level 3 — — — — Ending balance $ 20 $ 18 $ 20 $ 18 Change in unrealized gains or losses for the period included in earnings for securities held at the end of the reporting period — — — — |
Fair Value of Financial Instruments by Balance Sheet Grouping | Information with respect to the carrying amounts and estimated fair values of these financial instruments follow: June 30, 2017 December 31, 2016 Carrying Fair Carrying Fair (Millions) Value Value Value Value Long-term debt, excluding current portion $ 11,088 $ 11,567 $ 10,678 $ 11,168 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Stock-Based Compensation | |
Stock-Based Compensation Expense | Stock-Based Compensation Expense Three months ended Six months ended June 30, June 30, (Millions) 2017 2016 2017 2016 Cost of sales $ 9 $ 8 $ 32 $ 31 Selling, general and administrative expenses 43 34 141 130 Research, development and related expenses 7 7 33 32 Stock-based compensation expenses $ 59 $ 49 $ 206 $ 193 Income tax benefits $ (74) $ (72) $ (222) $ (199) Stock-based compensation expenses (benefits), net of tax $ (15) $ (23) $ (16) $ (6) |
Stock Option Activity | Stock Option Program The following table summarizes stock option activity during the six months ended June 30, 2017: Weighted Average Weighted Remaining Aggregate Number of Average Contractual Intrinsic Value Options Exercise Price Life (months) (millions) Under option — January 1 36,196,232 $ 112.07 Granted: Annual 5,409,628 175.93 Exercised (4,667,165) 89.38 Canceled (122,880) 161.12 June 30 36,815,815 $ 124.16 75 $ 3,093 Options exercisable June 30 26,069,052 $ 107.43 61 $ 2,627 |
Stock Option Assumptions | Stock Option Assumptions Annual 2017 Exercise price $ 175.76 Risk-free interest rate 2.1 % Dividend yield 2.5 % Expected volatility 17.3 % Expected life (months) 78 Black-Scholes fair value $ 23.51 |
Restricted Stock and Restricted Stock Units Activity | Restricted Stock and Restricted Stock Units The following table summarizes restricted stock and restricted stock unit activity during the six months ended June 30, 2017: Weighted Average Number of Grant Date Awards Fair Value Nonvested balance — As of January 1 2,185,046 $ 145.64 Granted Annual 604,256 176.10 Other 1,547 184.98 Vested (758,403) 126.75 Forfeited (31,511) 157.36 As of June 30 2,000,935 $ 161.84 |
Performance Shares Activity | The following table summarizes performance share activity during the six months ended June 30, 2017: Weighted Average Number of Grant Date Awards Fair Value Undistributed balance — As of January 1 656,278 $ 142.98 Granted 187,480 189.81 Distributed (312,173) 124.63 Performance change 65,216 173.25 Forfeited (9,275) 168.09 As of June 30 587,526 $ 170.63 |
Business Segments (Tables)
Business Segments (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Business Segment | |
Business Segment Information | Business Segment Information Three months ended Six months ended June 30, June 30, (Millions) 2017 2016 2017 2016 Net Sales Industrial $ 2,720 $ 2,654 $ 5,429 $ 5,253 Safety and Graphics 1,547 1,561 3,074 3,038 Health Care 1,440 1,414 2,863 2,805 Electronics and Energy 1,214 1,129 2,424 2,218 Consumer 1,137 1,130 2,179 2,180 Corporate and Unallocated 2 3 4 3 Elimination of Dual Credit (250) (229) (478) (426) Total Company $ 7,810 $ 7,662 $ 15,495 $ 15,071 Operating Income Industrial $ 523 $ 620 $ 1,148 $ 1,242 Safety and Graphics 852 421 1,251 780 Health Care 412 462 846 919 Electronics and Energy 301 217 526 412 Consumer 195 281 417 519 Corporate and Unallocated (44) (84) (125) (124) Elimination of Dual Credit (55) (51) (105) (94) Total Company $ 2,184 $ 1,866 $ 3,958 $ 3,654 |
Significant Accounting Polici33
Significant Accounting Policies - Basis of Presentation (Details) | 3 Months Ended |
Mar. 31, 2017division | |
Significant Accounting Policies | |
Number of divisions combined to form new division | 2 |
Significant Accounting Polici34
Significant Accounting Policies - Foreign Currency Translation (Details) VEF in Billions | 12 Months Ended | |
Dec. 31, 2016 | Jun. 30, 2017VEF | |
Foreign Currency Translation | ||
Operating income of Venezuelan subsidiary as percent of consolidated amount high end of range | 1.00% | |
Maximum balance of company's net monetary assets in Venezuelan bolivars | VEF 5 | |
Exchange rate established by Venezuelan government from bolivars to dollars - DIPRO | 10 | |
Exchange rate established by Venezuelan government from bolivars to dollars - DICOM | 2,600 |
Significant Accounting Polici35
Significant Accounting Policies - Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Earnings per share | ||||
Options outstanding not included in computation of diluted earnings per share (in shares) | 2.9 | 1.6 | 5.9 | |
Numerator: | ||||
Net income attributable to 3M | $ 1,583 | $ 1,291 | $ 2,906 | $ 2,566 |
Denominator: | ||||
Denominator for weighted average 3M common shares outstanding - basic (in shares) | 598.1 | 606.9 | 598.1 | 607.2 |
Dilution associated with the Company's stock-based compensation plans (in shares) | 14.7 | 14 | 14.3 | 13.9 |
Denominator for weighted average 3M common shares outstanding - diluted (in shares) | 612.8 | 620.9 | 612.4 | 621.1 |
Earnings per share attributable to 3M common shareholders - basic (in dollars per share) | $ 2.65 | $ 2.13 | $ 4.86 | $ 4.23 |
Earnings per share attributable to 3M common shareholders - diluted (in dollars per share) | $ 2.58 | $ 2.08 | $ 4.74 | $ 4.13 |
Significant Accounting Polici36
Significant Accounting Policies - New Accounting Pronouncements (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
ASU 2016-01 Recognition and Measurement of Financial Assets and Financial Liabilities | Maximum | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Approximate equity securities and cost method investments in aggregate | $ 75 | $ 75 | ||
ASU 2017-07 Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Amount of net periodic benefit costs (benefits) that will no longer be included within operating expenses once ASU No. 2017-07 is adopted. | $ (32) | $ (54) | $ (64) | $ (106) |
Acquisitions and Divestitures -
Acquisitions and Divestitures - Acquisitions (Details) - USD ($) $ in Millions | 6 Months Ended | 12 Months Ended | |
Jun. 30, 2016 | Dec. 31, 2016 | Mar. 31, 2017 | |
Business Acquisitions Information | |||
Purchase price paid for business combinations (net of cash acquired) | $ 4 | ||
Supplemental information: | |||
Cash paid, net of cash acquired | $ 4 | ||
Scott Safety | |||
Supplemental information: | |||
Estimated purchase price to acquire business | $ 2,000 | ||
Annual sales prior to acquisition | $ 570 |
Acquisitions and Divestitures38
Acquisitions and Divestitures - Divestitures (Details) $ in Millions | 1 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2017USD ($) | Jan. 31, 2017USD ($) | Jun. 30, 2017USD ($)item | Mar. 31, 2017USD ($) | Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($)item | |
Divestiture Information | ||||||
Number of divested businesses sold or announced to be sold | item | 4 | |||||
Aggregate operating income of divested businesses | $ 20 | |||||
Disposal Group, Held-for-sale, Not Discontinued Operations | ||||||
Divestiture Information | ||||||
Disposal - Accounts receivable | 25 | |||||
Disposal - Property, plant and equipment | 25 | |||||
Disposal - Intangible assets | 35 | |||||
Disposal - Deferred revenue | 35 | |||||
Disposal - Goodwill | $ 50 | $ 50 | 270 | |||
Identity Management Business | Disposal Group, Disposed of by Sale, Not Discontinued Operations | ||||||
Divestiture Information | ||||||
Annual sales of divested business | $ 205 | |||||
Safety Prescription Eyewear Business | Disposal Group, Disposed of by Sale, Not Discontinued Operations | ||||||
Divestiture Information | ||||||
Annual sales of divested business | $ 45 | |||||
2017 estimated pre-tax gain on sale | $ 29 | |||||
Identity Management and Tolling and Automated License Number Plate Recognition Business in Aggregate | Disposal Group, Disposed of by Sale, Not Discontinued Operations | ||||||
Divestiture Information | ||||||
Number of businesses sold | item | 2 | |||||
Proceeds from divested businesses | $ 833 | |||||
Proceeds from divested businesses, net of cash sold | 809 | |||||
Aggregate pre-tax gain on sale | 461 | |||||
Tolling and Automated License Number Plate Recognition Business | Disposal Group, Disposed of by Sale, Not Discontinued Operations | ||||||
Divestiture Information | ||||||
Annual sales of divested business | 40 | |||||
Electronic Monitoring Business | Disposal Group, Held-for-sale, Not Discontinued Operations | ||||||
Divestiture Information | ||||||
Annual sales of divested business | 95 | |||||
Aggregate selling price relative to the divestiture transaction | $ 200 | $ 200 | ||||
Electronic Monitoring Business | Disposal Group, Held-for-sale, Not Discontinued Operations | Estimated Financial Impact | ||||||
Divestiture Information | ||||||
Aggregate pre-tax gain on sale | $ 100 |
Goodwill and Intangible Asset39
Goodwill and Intangible Assets (Goodwill balance by business segment) (Details) - USD ($) | 3 Months Ended | 6 Months Ended |
Mar. 31, 2017 | Jun. 30, 2017 | |
Goodwill | ||
Balance at the beginning of the period | $ 9,166,000,000 | $ 9,166,000,000 |
Divestiture activity | (276,000,000) | |
Translation and other | 215,000,000 | |
Balance at the end of the period | 9,105,000,000 | |
Amount of Goodwill impairment | 0 | |
Industrial | ||
Goodwill | ||
Balance at the beginning of the period | 2,536,000,000 | 2,536,000,000 |
Translation and other | 93,000,000 | |
Balance at the end of the period | 2,629,000,000 | |
Safety and Graphics | ||
Goodwill | ||
Balance at the beginning of the period | 3,324,000,000 | 3,324,000,000 |
Divestiture activity | (276,000,000) | |
Translation and other | 54,000,000 | |
Balance at the end of the period | 3,102,000,000 | |
Health Care | ||
Goodwill | ||
Balance at the beginning of the period | 1,609,000,000 | 1,609,000,000 |
Translation and other | 41,000,000 | |
Balance at the end of the period | 1,650,000,000 | |
Electronics and Energy | ||
Goodwill | ||
Balance at the beginning of the period | 1,489,000,000 | 1,489,000,000 |
Translation and other | 26,000,000 | |
Balance at the end of the period | 1,515,000,000 | |
Consumer | ||
Goodwill | ||
Balance at the beginning of the period | $ 208,000,000 | 208,000,000 |
Translation and other | 1,000,000 | |
Balance at the end of the period | $ 209,000,000 |
Goodwill and Intangible Asset40
Goodwill and Intangible Assets (Acquired Intangible Assets) (Details) - USD ($) $ in Millions | 6 Months Ended | |
Jun. 30, 2017 | Dec. 31, 2016 | |
Acquired intangible assets disclosures | ||
Total gross carrying amount | $ 3,561 | $ 3,696 |
Total accumulated amortization | (2,000) | (2,005) |
Total finite-lived intangible assets - net | 1,561 | 1,691 |
Non-amortizable intangible assets (primarily tradenames) | 640 | 629 |
Total intangible assets - net | $ 2,201 | 2,320 |
Minimum | ||
Acquired intangible assets disclosures | ||
Indefinite lived tradenames years in existence | 55 years | |
Customer related intangible assets | ||
Acquired intangible assets disclosures | ||
Total gross carrying amount | $ 1,900 | 1,939 |
Total accumulated amortization | (818) | (797) |
Patents | ||
Acquired intangible assets disclosures | ||
Total gross carrying amount | 585 | 602 |
Total accumulated amortization | (494) | (497) |
Other technology-based intangible assets | ||
Acquired intangible assets disclosures | ||
Total gross carrying amount | 475 | 524 |
Total accumulated amortization | (284) | (302) |
Definite-lived tradenames | ||
Acquired intangible assets disclosures | ||
Total gross carrying amount | 392 | 420 |
Total accumulated amortization | (231) | (236) |
Other amortizable intangible assets | ||
Acquired intangible assets disclosures | ||
Total gross carrying amount | 209 | 211 |
Total accumulated amortization | $ (173) | $ (173) |
Goodwill and Intangible Asset41
Goodwill and Intangible Assets (Schedules for Amortization Expense) (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Finite Lived Intangible Asset | ||||
Amortization expense for acquired intangible assets | $ 47 | $ 66 | $ 111 | $ 132 |
Expected amortization expense for acquired intangible assets recorded as of balance sheet date | ||||
Remainder of 2017 | 118 | 118 | ||
2,018 | 190 | 190 | ||
2,019 | 181 | 181 | ||
2,020 | 172 | 172 | ||
2,021 | 160 | 160 | ||
2,022 | 147 | 147 | ||
After 2,022 | $ 593 | $ 593 |
Restructuring Actions and Exi42
Restructuring Actions and Exit Activities (Details) $ in Millions | 3 Months Ended | |
Jun. 30, 2017USD ($)item | Mar. 31, 2017USD ($) | |
Restructuring Cost and Reserve [Line Items] | ||
Restructuring and related cost, number of positions affected | item | 1,300 | |
Restructuring charges | $ 99 | |
Employee-Related | ||
Restructuring Cost and Reserve [Line Items] | ||
Restructuring charges | 99 | |
Pre-tax charge related to exit activities | $ 24 | |
Corporate and Unallocated | Employee-Related | ||
Restructuring Cost and Reserve [Line Items] | ||
Restructuring charges | 6 | |
Cost of sales | ||
Restructuring Cost and Reserve [Line Items] | ||
Restructuring charges | 86 | |
Selling, general and administrative expenses | ||
Restructuring Cost and Reserve [Line Items] | ||
Restructuring charges | 5 | |
Research, development and related expenses | ||
Restructuring Cost and Reserve [Line Items] | ||
Restructuring charges | 8 | |
Industrial | Business Segments | Employee-Related | ||
Restructuring Cost and Reserve [Line Items] | ||
Restructuring charges | 39 | |
Safety and Graphics | Business Segments | Employee-Related | ||
Restructuring Cost and Reserve [Line Items] | ||
Restructuring charges | 9 | |
Health Care | Business Segments | Employee-Related | ||
Restructuring Cost and Reserve [Line Items] | ||
Restructuring charges | 2 | |
Electronics and Energy | Business Segments | Employee-Related | ||
Restructuring Cost and Reserve [Line Items] | ||
Restructuring charges | 7 | |
Consumer | Business Segments | Employee-Related | ||
Restructuring Cost and Reserve [Line Items] | ||
Restructuring charges | $ 36 |
Restructuring Actions and Exi43
Restructuring Actions and Exit Activities - Roll Forward (Details) - Employee-Related $ in Millions | 3 Months Ended |
Jun. 30, 2017USD ($) | |
Restructuring Reserve [Roll Forward] | |
Expenses incurred | $ 99 |
Restructuring action balances, Ending Balance | $ 99 |
Supplemental Equity and Compr44
Supplemental Equity and Comprehensive Income Information - SE Rf (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Increase (decrease) in equity | ||||
Balance at the beginning of the period | $ 11,040 | $ 11,495 | $ 10,343 | $ 11,468 |
Net income | 1,585 | 1,293 | 2,911 | 2,571 |
Other comprehensive income (loss), net of tax: | ||||
Cumulative translation adjustment | (67) | 37 | 225 | 175 |
Defined benefit pension and postretirement plans adjustment | 78 | 67 | 161 | 136 |
Cash flow hedging instruments - unrealized gain (loss) | (51) | (27) | (127) | (137) |
Total other comprehensive income (loss), net of tax | (40) | 77 | 259 | 174 |
Dividends declared | (701) | (672) | (1,403) | (1,344) |
Stock-based compensation | 55 | 47 | 183 | 172 |
Reacquired stock | (475) | (837) | (1,153) | (2,000) |
Issuances pursuant to stock option and benefit plans | 180 | 255 | 504 | 617 |
Balance at the end of the period | 11,644 | 11,658 | 11,644 | 11,658 |
Common Stock and Additional Paid-in Capital | ||||
Increase (decrease) in equity | ||||
Balance at the beginning of the period | 5,198 | 4,925 | 5,070 | 4,800 |
Other comprehensive income (loss), net of tax: | ||||
Stock-based compensation | 55 | 47 | 183 | 172 |
Balance at the end of the period | 5,253 | 4,972 | 5,253 | 4,972 |
Retained Earnings | ||||
Increase (decrease) in equity | ||||
Balance at the beginning of the period | 38,094 | 36,506 | 37,907 | 36,296 |
Net income | 1,583 | 1,291 | 2,906 | 2,566 |
Other comprehensive income (loss), net of tax: | ||||
Dividends declared | (701) | (672) | (1,403) | (1,344) |
Issuances pursuant to stock option and benefit plans | (183) | (210) | (617) | (603) |
Balance at the end of the period | 38,793 | 36,915 | 38,793 | 36,915 |
Treasury Stock | ||||
Increase (decrease) in equity | ||||
Balance at the beginning of the period | (25,354) | (23,716) | (25,434) | (23,308) |
Other comprehensive income (loss), net of tax: | ||||
Reacquired stock | (475) | (837) | (1,153) | (2,000) |
Issuances pursuant to stock option and benefit plans | 363 | 465 | 1,121 | 1,220 |
Balance at the end of the period | (25,466) | (24,088) | (25,466) | (24,088) |
Accumulated Other Comprehensive Income (Loss) | ||||
Increase (decrease) in equity | ||||
Balance at the beginning of the period | (6,949) | (6,261) | (7,245) | (6,359) |
Other comprehensive income (loss), net of tax: | ||||
Cumulative translation adjustment | (67) | 37 | 222 | 176 |
Defined benefit pension and postretirement plans adjustment | 78 | 67 | 161 | 136 |
Cash flow hedging instruments - unrealized gain (loss) | (51) | (27) | (127) | (137) |
Balance at the end of the period | (6,989) | (6,184) | (6,989) | (6,184) |
Noncontrolling Interest | ||||
Increase (decrease) in equity | ||||
Balance at the beginning of the period | 51 | 41 | 45 | 39 |
Net income | 2 | 2 | 5 | 5 |
Other comprehensive income (loss), net of tax: | ||||
Cumulative translation adjustment | 3 | (1) | ||
Balance at the end of the period | $ 53 | $ 43 | $ 53 | $ 43 |
Supplemental Equity and Compr45
Supplemental Equity and Comprehensive Income Information - AOCI rf (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
AOCI Attributable to 3M, Net of Tax [Roll Forward] | ||||
Stockholders' Equity Attributable to 3M, Beginning Balance | $ 10,298 | |||
Other comprehensive income (loss), before tax: | ||||
Stockholders' Equity Attributable to 3M, Ending Balance | $ 11,591 | 11,591 | ||
Accumulated Other Comprehensive Income (Loss) | ||||
AOCI Attributable to 3M, Net of Tax [Roll Forward] | ||||
Stockholders' Equity Attributable to 3M, Beginning Balance | (6,949) | $ (6,261) | (7,245) | $ (6,359) |
Other comprehensive income (loss), before tax: | ||||
Amounts before reclassifications | (241) | 44 | (116) | (17) |
Amounts reclassified out | 114 | 73 | 215 | 124 |
Total other comprehensive income (loss), before tax | (127) | 117 | 99 | 107 |
Tax effect | 87 | (40) | 157 | 68 |
Total other comprehensive income (loss), net of tax | (40) | 77 | 256 | 175 |
Stockholders' Equity Attributable to 3M, Ending Balance | (6,989) | (6,184) | (6,989) | (6,184) |
Cumulative Translation Adjustment | ||||
AOCI Attributable to 3M, Net of Tax [Roll Forward] | ||||
Stockholders' Equity Attributable to 3M, Beginning Balance | (1,719) | (1,540) | (2,008) | (1,679) |
Other comprehensive income (loss), before tax: | ||||
Amounts before reclassifications | (167) | 59 | 59 | 119 |
Total other comprehensive income (loss), before tax | (167) | 59 | 59 | 119 |
Tax effect | 100 | (22) | 163 | 57 |
Total other comprehensive income (loss), net of tax | (67) | 37 | 222 | 176 |
Stockholders' Equity Attributable to 3M, Ending Balance | (1,786) | (1,503) | (1,786) | (1,503) |
Gains (losses) associated with defined benefit pension and postretirement plans amortization | ||||
AOCI Attributable to 3M, Net of Tax [Roll Forward] | ||||
Stockholders' Equity Attributable to 3M, Beginning Balance | (5,245) | (4,735) | (5,328) | (4,804) |
Other comprehensive income (loss), before tax: | ||||
Amounts reclassified out | 119 | 101 | 238 | 204 |
Total other comprehensive income (loss), before tax | 119 | 101 | 238 | 204 |
Tax effect | (41) | (34) | (77) | (68) |
Total other comprehensive income (loss), net of tax | 78 | 67 | 161 | 136 |
Stockholders' Equity Attributable to 3M, Ending Balance | (5,167) | (4,668) | (5,167) | (4,668) |
Cash flow hedging instruments gains (losses) | ||||
AOCI Attributable to 3M, Net of Tax [Roll Forward] | ||||
Stockholders' Equity Attributable to 3M, Beginning Balance | 15 | 14 | 91 | 124 |
Other comprehensive income (loss), before tax: | ||||
Amounts before reclassifications | (74) | (15) | (175) | (136) |
Amounts reclassified out | (5) | (28) | (23) | (80) |
Total other comprehensive income (loss), before tax | (79) | (43) | (198) | (216) |
Tax effect | 28 | 16 | 71 | 79 |
Total other comprehensive income (loss), net of tax | (51) | (27) | (127) | (137) |
Stockholders' Equity Attributable to 3M, Ending Balance | $ (36) | $ (13) | $ (36) | $ (13) |
Supplemental Equity and Compr46
Supplemental Equity and Comprehensive Income Information - Reclass AOCI (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income [Line Items] | ||||
Net of tax | $ (75) | $ (50) | $ (146) | $ (85) |
Gains (losses) associated with defined benefit pension and postretirement plans amortization | ||||
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income [Line Items] | ||||
Transition asset | 1 | 1 | ||
Prior service benefit | 22 | 24 | 44 | 47 |
Net actuarial loss | (141) | (126) | (282) | (252) |
Total before tax | (119) | (101) | (238) | (204) |
Tax effect | 41 | 34 | 77 | 68 |
Net of tax | (78) | (67) | (161) | (136) |
Cash flow hedging instruments gains (losses) | ||||
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income [Line Items] | ||||
Total before tax | 5 | 28 | 23 | 80 |
Tax effect | (2) | (11) | (8) | (29) |
Net of tax | 3 | 17 | 15 | 51 |
Cash flow hedging instruments gains (losses) | Foreign currency forward/option contracts | ||||
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income [Line Items] | ||||
Cost of sales | $ 5 | $ 28 | $ 23 | 81 |
Cash flow hedging instruments gains (losses) | Interest rate swap contracts | ||||
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income [Line Items] | ||||
Interest expense | $ (1) |
Income Taxes - Reconciliation (
Income Taxes - Reconciliation (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 | |
Income tax | |||||
Net UTB impacting the effective tax rate | $ 370 | $ 370 | $ 333 | ||
Interest and penalties related to unrecognized tax benefits, expense (benefit) recognized on a gross basis | 5 | $ 1 | 8 | $ (3) | |
Interest and penalties related to unrecognized tax benefits, accrued on a gross basis | $ 56 | $ 56 | 52 | ||
Increase (decrease) in effective income tax rate from prior reporting period to current reporting period (as a percent) | (3.60%) | (3.20%) | |||
Impact of factors that decreased the effective tax rate from prior reporting period to current reporting period (as a percent) | (5.00%) | ||||
Impact of factors that increased the effective tax rate from prior reporting period to current reporting period (as a percent) | 1.40% | ||||
Deferred Tax Assets, Valuation Allowance | $ 57 | $ 57 | $ 47 | ||
Reconciliation of Effective Income Tax Rate | |||||
Effective tax rate (as a percent) | 26.00% | 29.60% | 25.00% | 28.20% |
Marketable Securities (current
Marketable Securities (current and non-current) (Details) - USD ($) $ in Millions | Jun. 30, 2017 | Dec. 31, 2016 |
Marketable securities classification | ||
Current marketable securities | $ 140 | $ 280 |
Non-current marketable securities | 17 | 17 |
Total marketable securities | 157 | 297 |
Corporate debt securities | ||
Marketable securities classification | ||
Current marketable securities | 10 | 10 |
Commercial paper | ||
Marketable securities classification | ||
Current marketable securities | 37 | 14 |
Certificates of deposit/time deposits | ||
Marketable securities classification | ||
Current marketable securities | 53 | 197 |
U.S. municipal securities | ||
Marketable securities classification | ||
Current marketable securities | 3 | 3 |
Non-current marketable securities | 17 | 17 |
Asset-backed securities total | ||
Marketable securities classification | ||
Current marketable securities | 37 | 56 |
Asset-backed securities Automobile loan related | ||
Marketable securities classification | ||
Current marketable securities | 28 | 31 |
Asset-backed securities Credit card related | ||
Marketable securities classification | ||
Current marketable securities | $ 9 | 18 |
Asset-backed securities Other asset-backed securities | ||
Marketable securities classification | ||
Current marketable securities | $ 7 |
Marketable Securities (Contract
Marketable Securities (Contractual maturity) (Details) - USD ($) $ in Millions | Jun. 30, 2017 | Dec. 31, 2016 |
Marketable securities by contractual maturity | ||
Due in one year or less | $ 104 | |
Due after one year through five years | 49 | |
Due after five years through ten years | 4 | |
Total marketable securities | $ 157 | $ 297 |
Marketable Securities - Narrati
Marketable Securities - Narrative (Details) | 6 Months Ended |
Jun. 30, 2017item | |
Percentage of asset-backed securities rated AAA/A-1+, Aaa/P-1, or AAA/F1+ | 76.80% |
Number of rating agencies for asset backed securities that must be either Moody's or Standard and Poor's | 1 |
Minimum | |
Number of rating agencies for which asset backed securities must be rated | 2 |
Long-Term Debt and Short-Term51
Long-Term Debt and Short-Term Borrowings - Narrative (Details) $ in Millions | Jun. 30, 2017USD ($) |
Fixed rate medium term notes repaid June 2017 | |
Debt Instrument [Line Items] | |
Principal amount | $ 650 |
Pension and Postretirement Be52
Pension and Postretirement Benefit Plans - Narrative (Details) $ in Millions | 1 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
May 31, 2017USD ($) | Apr. 30, 2017item | Mar. 31, 2014item | Jun. 30, 2017USD ($) | Dec. 31, 2016 | Mar. 31, 2011LimitedPartnership | |
WG Trading Company | ||||||
Benefit Plan Information | ||||||
Number of insurers 3M and certain benefit plans filed lawsuits on seeking insurance coverage for the WG Trading Company claim | item | 5 | |||||
Decrease in U.S. pension and postretirement plan assets at year end measurement date due to legal outcome | $ 73 | |||||
Number of additional limited partners of WG Trading Company, in addition to 3M, who objected and appealed the court's order to the United States Court of Appeals for the Second Circuit | LimitedPartnership | 6 | |||||
Panda Temple Power LLC | ||||||
Benefit Plan Information | ||||||
Number of entities in which the U.S. pension and postretirement benefit plans have invested in that filed for chapter 11 bankruptcy protection | item | 1 | |||||
Panda Temple Power LLC | Maximum | ||||||
Benefit Plan Information | ||||||
Percentage of investment in relation to the fair value of the U.S. pension and postretirement benefit plans' assets at the most recent measurement date | 1.00% | |||||
Qualified and Non-qualified Pension Benefits | Funded | ||||||
Benefit Plan Information | ||||||
Company contributions year to date | $ 277 | |||||
Qualified and Non-qualified Pension Benefits | Maximum | Funded | ||||||
Benefit Plan Information | ||||||
Estimated pension and postretirement employer contributions in current fiscal year | 500 | |||||
Qualified and Non-qualified Pension Benefits | Minimum | Funded | ||||||
Benefit Plan Information | ||||||
Estimated pension and postretirement employer contributions in current fiscal year | 300 | |||||
Postretirement Benefits | Funded | ||||||
Benefit Plan Information | ||||||
Company contributions year to date | $ 2 |
Pension and Postretirement Be53
Pension and Postretirement Benefit Plans - Components of net periodic benefit cost and other information 10Q (Details) - Funded - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Qualified and Non-qualified Pension Benefits | United States | ||||
Net periodic benefit cost (benefit) | ||||
Service cost | $ 67 | $ 65 | $ 134 | $ 130 |
Interest cost | 142 | 144 | 284 | 287 |
Expected return on plan assets | (259) | (261) | (518) | (521) |
Amortization of prior service cost (benefit) | (6) | (6) | (12) | (12) |
Amortization of net actuarial (gain) loss | 97 | 88 | 194 | 176 |
Net periodic benefit cost (benefit) after settlements, curtailments, special termination benefits and other | 41 | 30 | 82 | 60 |
Qualified and Non-qualified Pension Benefits | International | ||||
Net periodic benefit cost (benefit) | ||||
Service cost | 34 | 34 | 67 | 67 |
Interest cost | 37 | 43 | 74 | 86 |
Expected return on plan assets | (70) | (78) | (139) | (156) |
Amortization of transition (asset) obligation | (1) | (1) | ||
Amortization of prior service cost (benefit) | (3) | (4) | (6) | (7) |
Amortization of net actuarial (gain) loss | 30 | 23 | 60 | 45 |
Net periodic benefit cost (benefit) after settlements, curtailments, special termination benefits and other | 28 | 17 | 56 | 34 |
Postretirement Benefits | ||||
Net periodic benefit cost (benefit) | ||||
Service cost | 12 | 14 | 25 | 27 |
Interest cost | 20 | 19 | 39 | 39 |
Expected return on plan assets | (21) | (22) | (42) | (45) |
Amortization of prior service cost (benefit) | (13) | (14) | (26) | (28) |
Amortization of net actuarial (gain) loss | 14 | 15 | 28 | 31 |
Net periodic benefit cost (benefit) after settlements, curtailments, special termination benefits and other | $ 12 | $ 12 | $ 24 | $ 24 |
Derivatives - Cash Flow Hedges
Derivatives - Cash Flow Hedges (Details) - Cash flow hedge - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Mar. 31, 2017 | Dec. 31, 2016 | |
Derivatives in Cash Flow Hedging Relationships | ||||||
Pretax Gain (Loss) Recognized in Other Comprehensive Income on Effective portion of Derivative | $ (74) | $ (15) | $ (175) | $ (136) | ||
Pretax gain (loss) recognized in income on effective portion of derivative as a result of reclassification from accumulated other comprehensive income | 5 | 28 | 23 | 80 | ||
Accumulated other comprehensive income (loss), unrealized gain (loss) on cash flow hedges | (36) | (36) | ||||
After-tax net unrealized gain (loss) anticipated to be reclassifed from AOCI to the income statement within next twelve months | (16) | |||||
After-tax net unrealized gain (loss) anticipated to be reclassifed from AOCI to the Income Statement over remaining fiscal year | (1) | |||||
After-tax net unrealized gain (loss) anticipated to be reclassifed from AOCI to the Income Statement in 2018 | (18) | |||||
After-tax unrealized gain (loss) anticipated to be reclassifed from AOCI to the Income Statement after 2018 | $ (17) | |||||
Foreign currency forward/option contracts | ||||||
Derivatives in Cash Flow Hedging Relationships | ||||||
Maximum length of time hedged in cash flow hedge | 36 months | |||||
Pretax Gain (Loss) Recognized in Other Comprehensive Income on Effective portion of Derivative | (72) | (11) | $ (172) | (131) | ||
Foreign currency forward/option contracts | Cost of sales | ||||||
Derivatives in Cash Flow Hedging Relationships | ||||||
Pretax gain (loss) recognized in income on effective portion of derivative as a result of reclassification from accumulated other comprehensive income | 5 | 28 | 23 | 81 | ||
Interest rate swap contracts | ||||||
Derivatives in Cash Flow Hedging Relationships | ||||||
Derivative notional amount | 200 | 300 | 200 | 300 | $ 200 | $ 200 |
Pretax Gain (Loss) Recognized in Other Comprehensive Income on Effective portion of Derivative | (2) | $ (4) | (3) | (5) | ||
Accumulated other comprehensive income (loss), unrealized gain (loss) on cash flow hedges | $ (5) | $ (5) | ||||
Interest rate swap contracts | Interest expense | ||||||
Derivatives in Cash Flow Hedging Relationships | ||||||
Pretax gain (loss) recognized in income on effective portion of derivative as a result of reclassification from accumulated other comprehensive income | $ (1) |
Derivatives - Fair Value Hedges
Derivatives - Fair Value Hedges (Details) - Fair value hedges - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Derivatives in Fair Value Hedging Relationships | ||||
Gain (Loss) on Derivative Recognized in income | $ 1 | $ 5 | $ (4) | $ 34 |
Gain (Loss) on Hedged Item Recognized in Income | (1) | (5) | 4 | (34) |
Interest rate swap contracts | Interest expense | ||||
Derivatives in Fair Value Hedging Relationships | ||||
Gain (Loss) on Derivative Recognized in income | 1 | 5 | (4) | 34 |
Gain (Loss) on Hedged Item Recognized in Income | $ (1) | $ (5) | $ 4 | $ (34) |
Derivatives - Net Investment He
Derivatives - Net Investment Hedges (Details) - Net Investment Hedges € in Millions, ₩ in Billions | 3 Months Ended | 6 Months Ended | ||||
Jun. 30, 2017USD ($) | Jun. 30, 2016USD ($) | Jun. 30, 2017USD ($) | Jun. 30, 2016USD ($) | Jun. 30, 2017KRW (₩) | Jun. 30, 2017EUR (€) | |
Net investment hedges | ||||||
Effective portion of net investment hedge reclassified out of other comprehensive income into income | $ 0 | $ 0 | $ 0 | $ 0 | ||
Pretax Gain (Loss) Recognized as Cumulative Translation within Other Comprehensive Income on Effective Portion of Instrument | (277,000,000) | 110,000,000 | (418,000,000) | (77,000,000) | ||
Ineffective portion of gain (loss) on derivative and amount excluded from effectiveness testing recognized in income | 3,000,000 | 3,000,000 | 5,000,000 | 1,000,000 | ||
Foreign currency forward contracts | ||||||
Net investment hedges | ||||||
Derivative notional amount | ₩ 248 | € 250 | ||||
Pretax Gain (Loss) Recognized as Cumulative Translation within Other Comprehensive Income on Effective Portion of Instrument | (7,000,000) | 16,000,000 | (27,000,000) | (27,000,000) | ||
Foreign currency forward contracts | Cost of sales | ||||||
Net investment hedges | ||||||
Ineffective portion of gain (loss) on derivative and amount excluded from effectiveness testing recognized in income | 3,000,000 | 3,000,000 | 5,000,000 | 1,000,000 | ||
Foreign Currency Denominated Debt | ||||||
Net investment hedges | ||||||
Face amount of debt designated as a net investment hedge | € | € 4,400 | |||||
Pretax Gain (Loss) Recognized as Cumulative Translation within Other Comprehensive Income on Effective Portion of Instrument | $ (270,000,000) | $ 94,000,000 | $ (391,000,000) | $ (50,000,000) |
Derivatives - Not Designated (D
Derivatives - Not Designated (Details) - Derivatives not designated as hedging instruments - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Derivatives not designated as hedging instruments | ||||
Gain (Loss) on Derivative Recognized in income | $ (132) | $ 88 | $ (91) | $ 18 |
Foreign currency forward/option contracts | Cost of sales | ||||
Derivatives not designated as hedging instruments | ||||
Gain (Loss) on Derivative Recognized in income | 6 | (1) | 5 | (6) |
Foreign currency forward contracts | ||||
Derivatives not designated as hedging instruments | ||||
Increase (decrease) from previously presented gain recognized in income due to revision | 40 | (18) | ||
Foreign currency forward contracts | Interest expense | ||||
Derivatives not designated as hedging instruments | ||||
Gain (Loss) on Derivative Recognized in income | $ (138) | $ 89 | $ (96) | $ 24 |
Derivatives - BS Location (Deta
Derivatives - BS Location (Details) - USD ($) $ in Millions | Jun. 30, 2017 | Dec. 31, 2016 |
Location and Fair Value Amount of Derivative Instruments | ||
Fair Value of Derivative Instruments, Assets | $ 90 | $ 259 |
Fair Value of Derivative Instruments, Liabilities | 193 | 95 |
Derivatives designated as hedging instruments | ||
Location and Fair Value Amount of Derivative Instruments | ||
Fair Value of Derivative Instruments, Assets | 67 | 218 |
Fair Value of Derivative Instruments, Liabilities | 75 | 13 |
Derivatives designated as hedging instruments | Foreign currency forward/option contracts | Other current assets | ||
Location and Fair Value Amount of Derivative Instruments | ||
Fair Value of Derivative Instruments, Assets | 11 | 107 |
Derivatives designated as hedging instruments | Foreign currency forward/option contracts | Other assets | ||
Location and Fair Value Amount of Derivative Instruments | ||
Fair Value of Derivative Instruments, Assets | 32 | 86 |
Derivatives designated as hedging instruments | Foreign currency forward/option contracts | Other current liabilities | ||
Location and Fair Value Amount of Derivative Instruments | ||
Fair Value of Derivative Instruments, Liabilities | 42 | 9 |
Derivatives designated as hedging instruments | Foreign currency forward/option contracts | Other liabilities | ||
Location and Fair Value Amount of Derivative Instruments | ||
Fair Value of Derivative Instruments, Liabilities | 27 | 3 |
Derivatives designated as hedging instruments | Foreign currency forward/option contracts | Current balance sheet location | ||
Location and Fair Value Amount of Derivative Instruments | ||
Derivative Notional Amount | 2,208 | 2,160 |
Derivatives designated as hedging instruments | Foreign currency forward/option contracts | Noncurrent balance sheet location | ||
Location and Fair Value Amount of Derivative Instruments | ||
Derivative Notional Amount | 1,488 | 1,459 |
Derivatives designated as hedging instruments | Interest rate swap contracts | ||
Location and Fair Value Amount of Derivative Instruments | ||
Derivative Notional Amount | 1,953 | |
Derivatives designated as hedging instruments | Interest rate swap contracts | Other current assets | ||
Location and Fair Value Amount of Derivative Instruments | ||
Fair Value of Derivative Instruments, Assets | 2 | |
Derivatives designated as hedging instruments | Interest rate swap contracts | Other assets | ||
Location and Fair Value Amount of Derivative Instruments | ||
Fair Value of Derivative Instruments, Assets | 22 | 25 |
Derivatives designated as hedging instruments | Interest rate swap contracts | Other current liabilities | ||
Location and Fair Value Amount of Derivative Instruments | ||
Fair Value of Derivative Instruments, Liabilities | 4 | 1 |
Derivatives designated as hedging instruments | Interest rate swap contracts | Other liabilities | ||
Location and Fair Value Amount of Derivative Instruments | ||
Fair Value of Derivative Instruments, Liabilities | 2 | |
Derivatives designated as hedging instruments | Interest rate swap contracts | Current balance sheet location | ||
Location and Fair Value Amount of Derivative Instruments | ||
Derivative Notional Amount | 590 | |
Derivatives designated as hedging instruments | Interest rate swap contracts | Noncurrent balance sheet location | ||
Location and Fair Value Amount of Derivative Instruments | ||
Derivative Notional Amount | 1,753 | |
Derivatives not designated as hedging instruments | ||
Location and Fair Value Amount of Derivative Instruments | ||
Fair Value of Derivative Instruments, Assets | 23 | 41 |
Fair Value of Derivative Instruments, Liabilities | 118 | 82 |
Derivatives not designated as hedging instruments | Foreign currency forward/option contracts | ||
Location and Fair Value Amount of Derivative Instruments | ||
Derivative Notional Amount | 5,914 | 5,655 |
Derivatives not designated as hedging instruments | Foreign currency forward/option contracts | Other current assets | ||
Location and Fair Value Amount of Derivative Instruments | ||
Fair Value of Derivative Instruments, Assets | 23 | 41 |
Derivatives not designated as hedging instruments | Foreign currency forward/option contracts | Other current liabilities | ||
Location and Fair Value Amount of Derivative Instruments | ||
Fair Value of Derivative Instruments, Liabilities | $ 118 | $ 82 |
Derivatives - Offsetting Assets
Derivatives - Offsetting Assets (Details) $ in Millions | 6 Months Ended | |
Jun. 30, 2017USD ($)Counterparty | Dec. 31, 2016USD ($) | |
Offsetting of Financial Assets under Master Netting Agreements with Derivative Counterparties | ||
Number of master netting agreements supported by primary counterparty's parent guarantee | Counterparty | 16 | |
Number of credit support agreements by primary counterparty | Counterparty | 15 | |
Gross Amounts of Derivative Assets Presented in the Consolidated Balance Sheet | $ 90 | $ 259 |
Net Amounts of Derivative Assets | 55 | 220 |
Derivatives Subject to Master Netting Agreements | ||
Offsetting of Financial Assets under Master Netting Agreements with Derivative Counterparties | ||
Gross Amounts of Derivative Assets Presented in the Consolidated Balance Sheet | 90 | 259 |
Gross Amount of Eligible Offsetting Recognized Derivative Liabilities | 35 | 39 |
Net Amounts of Derivative Assets | $ 55 | $ 220 |
Derivatives - Offsetting Liabil
Derivatives - Offsetting Liabilities (Details) - USD ($) $ in Millions | Jun. 30, 2017 | Dec. 31, 2016 |
Offsetting of Financial Liabilities under Master Netting Agreements with Derivative Counterparties | ||
Gross Amounts of Derivative Liabilities Presented in the Consolidated Balance Sheet | $ 193 | $ 95 |
Net Amount of Derivative Liabilities | 158 | 56 |
Derivatives Subject to Master Netting Agreements | ||
Offsetting of Financial Liabilities under Master Netting Agreements with Derivative Counterparties | ||
Gross Amounts of Derivative Liabilities Presented in the Consolidated Balance Sheet | 189 | 93 |
Gross Amount of Eligible Offsetting Recognized Derivative Assets | 35 | 39 |
Net Amount of Derivative Liabilities | 154 | 54 |
Derivatives Not Subject to Master Netting Agreements | ||
Offsetting of Financial Liabilities under Master Netting Agreements with Derivative Counterparties | ||
Gross Amounts of Derivative Liabilities Presented in the Consolidated Balance Sheet | 4 | 2 |
Net Amount of Derivative Liabilities | $ 4 | $ 2 |
Derivatives - Currency Effects
Derivatives - Currency Effects (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended |
Jun. 30, 2017 | Jun. 30, 2017 | |
Foreign Currency [Abstract] | ||
Year-on-year foreign currency transaction effects, including hedging impact, gain (loss) impact on pre-tax income | $ (28) | $ (65) |
Fair Value Measurements - Recur
Fair Value Measurements - Recurring Basis (Details) - USD ($) $ in Millions | Jun. 30, 2017 | Dec. 31, 2016 |
Assets and Liabilities Measured on Recurring Basis | ||
Available-for-sale marketable securities | $ 157 | $ 297 |
Gross Amounts of Derivative Assets Presented in the Consolidated Balance Sheet | 90 | 259 |
Gross Amounts of Derivative Liabilities Presented in the Consolidated Balance Sheet | 193 | 95 |
Fair value on a recurring basis | Foreign currency forward/option contracts | ||
Assets and Liabilities Measured on Recurring Basis | ||
Gross Amounts of Derivative Assets Presented in the Consolidated Balance Sheet | 66 | 234 |
Gross Amounts of Derivative Liabilities Presented in the Consolidated Balance Sheet | 187 | 94 |
Fair value on a recurring basis | Interest rate swap contracts | ||
Assets and Liabilities Measured on Recurring Basis | ||
Gross Amounts of Derivative Assets Presented in the Consolidated Balance Sheet | 24 | 25 |
Gross Amounts of Derivative Liabilities Presented in the Consolidated Balance Sheet | 6 | 1 |
Fair value on a recurring basis | Corporate debt securities | ||
Assets and Liabilities Measured on Recurring Basis | ||
Available-for-sale marketable securities | 10 | 10 |
Fair value on a recurring basis | Commercial paper | ||
Assets and Liabilities Measured on Recurring Basis | ||
Available-for-sale marketable securities | 37 | 14 |
Fair value on a recurring basis | Certificates of deposit/time deposits | ||
Assets and Liabilities Measured on Recurring Basis | ||
Available-for-sale marketable securities | 53 | 197 |
Fair value on a recurring basis | Asset-backed securities Automobile loan related | ||
Assets and Liabilities Measured on Recurring Basis | ||
Available-for-sale marketable securities | 28 | 31 |
Fair value on a recurring basis | Asset-backed securities Credit card related | ||
Assets and Liabilities Measured on Recurring Basis | ||
Available-for-sale marketable securities | 9 | 18 |
Fair value on a recurring basis | Asset-backed securities Other asset-backed securities | ||
Assets and Liabilities Measured on Recurring Basis | ||
Available-for-sale marketable securities | 7 | |
Fair value on a recurring basis | U.S. municipal securities | ||
Assets and Liabilities Measured on Recurring Basis | ||
Available-for-sale marketable securities | 20 | 20 |
Fair value on a recurring basis | Level 2 | Foreign currency forward/option contracts | ||
Assets and Liabilities Measured on Recurring Basis | ||
Gross Amounts of Derivative Assets Presented in the Consolidated Balance Sheet | 66 | 234 |
Gross Amounts of Derivative Liabilities Presented in the Consolidated Balance Sheet | 187 | 94 |
Fair value on a recurring basis | Level 2 | Interest rate swap contracts | ||
Assets and Liabilities Measured on Recurring Basis | ||
Gross Amounts of Derivative Assets Presented in the Consolidated Balance Sheet | 24 | 25 |
Gross Amounts of Derivative Liabilities Presented in the Consolidated Balance Sheet | 6 | 1 |
Fair value on a recurring basis | Level 2 | Corporate debt securities | ||
Assets and Liabilities Measured on Recurring Basis | ||
Available-for-sale marketable securities | 10 | 10 |
Fair value on a recurring basis | Level 2 | Commercial paper | ||
Assets and Liabilities Measured on Recurring Basis | ||
Available-for-sale marketable securities | 37 | 14 |
Fair value on a recurring basis | Level 2 | Certificates of deposit/time deposits | ||
Assets and Liabilities Measured on Recurring Basis | ||
Available-for-sale marketable securities | 53 | 197 |
Fair value on a recurring basis | Level 2 | Asset-backed securities Automobile loan related | ||
Assets and Liabilities Measured on Recurring Basis | ||
Available-for-sale marketable securities | 28 | 31 |
Fair value on a recurring basis | Level 2 | Asset-backed securities Credit card related | ||
Assets and Liabilities Measured on Recurring Basis | ||
Available-for-sale marketable securities | 9 | 18 |
Fair value on a recurring basis | Level 2 | Asset-backed securities Other asset-backed securities | ||
Assets and Liabilities Measured on Recurring Basis | ||
Available-for-sale marketable securities | 7 | |
Fair value on a recurring basis | Level 3 | U.S. municipal securities | ||
Assets and Liabilities Measured on Recurring Basis | ||
Available-for-sale marketable securities | $ 20 | $ 20 |
Fair Value Measurements - Rec63
Fair Value Measurements - Recurring Reconciliation (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Reconciliation of items measured at fair value on a recurring basis that used significant unobservable inputs (Level 3) | ||||
Balance at the beginning of the period | $ 20 | $ 18 | $ 20 | $ 12 |
Total gains or losses included in earnings | 0 | 0 | 0 | 0 |
Total gains or losses included in other comprehensive income | 0 | 0 | 0 | 0 |
Purchases and issuances | 0 | 0 | 0 | 6 |
Sales and settlements | 0 | 0 | 0 | 0 |
Transfers in and/or out of Level 3 | 0 | 0 | 0 | 0 |
Balance at the end of the period | $ 20 | $ 18 | $ 20 | $ 18 |
Fair Value Measurements - Nonre
Fair Value Measurements - Nonrecurring (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Fair Value Measurements | ||||
Asset Impairment Charges | $ 0 | $ 0 | $ 40,000,000 | $ 0 |
Fair Value Measurements - Finan
Fair Value Measurements - Financial Instruments (Details) - USD ($) $ in Millions | Jun. 30, 2017 | Dec. 31, 2016 |
Carrying Value | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt, excluding current portion | $ 11,088 | $ 10,678 |
Fair Value | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt, excluding current portion | $ 11,567 | $ 11,168 |
Commitments and Contingencies -
Commitments and Contingencies - Respirator and Environmental (Details) | 3 Months Ended | 6 Months Ended | 12 Months Ended | |
Jun. 30, 2017USD ($) | Mar. 31, 2017USD ($) | Jun. 30, 2017USD ($)lawsuitcaseclaimitem | Dec. 31, 2016item | |
Respirator Mask/Asbestos Litigation | ||||
Loss contingencies | ||||
Total number of named claimants | 2,310 | 2,660 | ||
Number of total claims settled and taken to trial | claim | 11 | |||
Number of total claims settled and tried to verdict | claim | 9 | |||
Number of total claims tried to verdict | claim | 10 | |||
Payments for fees and settlements related to litigation | $ | $ 22,000,000 | $ 34,000,000 | ||
Insurance receivables | $ | 4,000,000 | $ 4,000,000 | ||
Respirator Mask/Asbestos Litigation - State of West Virginia | ||||
Loss contingencies | ||||
Number of additional defendants | 2 | |||
Accrued loss contingency reserve | $ | 0 | $ 0 | ||
Respirator Mask/Asbestos litigation - Excluding Aearo Technologies | ||||
Loss contingencies | ||||
Liability for asbestos and environmental claims gross-excluding Aearo Inc. | $ | 561,000,000 | 561,000,000 | ||
Respirator Mask/Asbestos Litigation - Aearo Technologies | ||||
Loss contingencies | ||||
Accrued loss contingency reserve | $ | 18,000,000 | 18,000,000 | ||
Quarterly fee paid to Cabot to retain responsibility and liability for products manufactured before July 11, 1995 | $ | $ 100,000 | |||
Number of claims with summary judgment | claim | 2 | |||
Number of remaining issues for Cabot's appeal after judgment in Aearo's favor | case | 2 | |||
Environmental Matters - Remediation | ||||
Loss contingencies | ||||
Accrued loss contingency reserve | $ | 36,000,000 | $ 36,000,000 | ||
Insurance receivables | $ | 8,000,000 | $ 8,000,000 | ||
Number of years remediation payments expected to be paid for applicable sites | 20 years | |||
Environmental Matters - Regulatory Activities | ||||
Loss contingencies | ||||
Number of years after phase-out decision in May 2000 that the Company stopped manufacturing and using vast majority of perfluorooctanyl compounds | 2 years | |||
Amount of PFOA and PFOS found in drinking water, either individually or combined, that are allowed per the EPA's announced lifetime health advisory levels in parts per trillion | 70 | |||
Amount of PFOA in drinking water allowed per provisional health advisories in parts per trillion (superseded) | 400 | |||
Amount of PFOS in drinking water allowed per provisional health advisories in parts per trillion (superseded) | 200 | |||
Number of PFCs the EPA has required to have public water system suppliers monitor | 6 | |||
Number of public water supplies the EPA reported results | 4,920 | |||
Number of water supplies that reported above advisory level with PFOA | 13 | |||
Number of water supplies that reported above advisory level with PFOS | 46 | |||
Number of water supplies that reported above advisory level with both PFOA and PFOS | 65 | |||
Environmental Matters - Regulatory Activities | Minimum | ||||
Loss contingencies | ||||
Number of water supply samples used to test for PFOA and PFOS under the EPA lifetime health advisory program | 1 | |||
Environmental Matters - Regulatory Activities | Alabama | ||||
Loss contingencies | ||||
Number of years covered by permit for sludge containing PFCs | 20 years | |||
Environmental Matters - Regulatory Activities | Minnesota Department of Health | ||||
Loss contingencies | ||||
Amount of PFOA in drinking water allowed per Minnesota Department of Health in parts per trillion | 35 | |||
Amount of PFOS in drinking water allowed per Minnesota Department of Health in parts per trillion | 27 | |||
Environmental Matters - Litigation | Federal court in Colorado, Pennsylvania, and state court in New York in aggregate | ||||
Loss contingencies | ||||
Number of lawsuits filed | lawsuit | 8 | |||
Environmental Matters - Litigation | Federal court in Colorado | ||||
Loss contingencies | ||||
Number of lawsuits filed | lawsuit | 3 | |||
Environmental Matters - Litigation | Federal court in Pennsylvania | ||||
Loss contingencies | ||||
Number of lawsuits filed | lawsuit | 4 | |||
Environmental Matters - Litigation | State court in New York | ||||
Loss contingencies | ||||
Number of lawsuits filed | lawsuit | 1 | |||
Environmental Matters - Litigation | Alabama | ||||
Loss contingencies | ||||
Number of local water works for whom the water authority supplies water | 5 | |||
Environmental Matters - Litigation | Morgan County, Alabama | ||||
Loss contingencies | ||||
Total number of named claimants | 3 | |||
Environmental Matters - Litigation | Metropolitan Council, Minnesota | ||||
Loss contingencies | ||||
Amount received from settlement in exchange for dismissing claim | $ | $ 1,000,000 | |||
Environmental Matters - Litigation | Metropolitan Council, Minnesota | Minimum | ||||
Loss contingencies | ||||
Number of wastewater treatment plants from which PFC-containing sludge and biosolids may allegedly be discharged by Metropolitan Council, low end of range | 1 | |||
Environmental Matters - Other Environmental Litigation | ||||
Loss contingencies | ||||
Accrued loss contingency reserve | $ | $ 28,000,000 | $ 28,000,000 | ||
Insurance receivable collected from insurer | $ | $ 15,000,000 | |||
Number of former disposal sites with PFC present in soil and groundwater in Washington County, Minnesota | 2 | |||
Environmental Matters - Other Environmental Litigation | Maximum | ||||
Loss contingencies | ||||
Number of years remediation payments expected to be paid for applicable sites | 4 years |
Commitments and Contingencies67
Commitments and Contingencies - Product Liability (Details) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2017USD ($)lawsuitcaseitem | Dec. 31, 2016item | |
Product Liability - Filters | ||
Product Liability Litigation | ||
Number of customers who obtained an order in the French Courts against 3M Purification SAS | 1 | |
Number of cases settled in principle in period | 2 | |
Product liability - Bair Hugger | ||
Product Liability Litigation | ||
Number of lawsuits filed | 2,600 | 1,260 |
Accrued loss contingency reserve | $ | $ 0 | |
Product liability - Bair Hugger | U.S. District Court for the Western District of Tennessee | ||
Product Liability Litigation | ||
Number of lawsuits filed | case | 1 | |
Product Liability Lava Ultimate Dental Restorative Material | ||
Product Liability Litigation | ||
Number of lawsuits filed | lawsuit | 2 | |
Product Liability Lava Ultimate Dental Restorative Material | U.S. District Court for the District of Minnesota | ||
Product Liability Litigation | ||
Number of lawsuits filed | lawsuit | 1 | |
Number of plaintiffs | 39 | |
Number of states involved in lawsuit | 13 |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details) - shares | 6 Months Ended | |
Jun. 30, 2017 | Dec. 31, 2016 | |
Share-based Compensation Arrangement by Share-based Payment Award Activity | ||
Retirement age eligibility for employees | 55 years | |
Retirement eligibility for employees, minimum years of service required | 10 years | |
Percent of stock-based compensation related to retiree-eligible population (as a percent) | 35.00% | |
Long Term Incentive Plan | ||
Share-based Compensation Arrangement by Share-based Payment Award Activity | ||
Number of shares authorized | 123,965,000 | |
Number of shares available for grant | 30,069,336 |
Stock-Based Compensation - Comp
Stock-Based Compensation - Compensation (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Amounts recognized in the financial statements | ||||
Stock-based compensation programs expense | $ 59 | $ 49 | $ 206 | $ 193 |
Income tax benefits | (74) | (72) | (222) | (199) |
Stock-based compensation expenses (benefits), net of tax | (15) | (23) | (16) | (6) |
Cost of sales | ||||
Amounts recognized in the financial statements | ||||
Stock-based compensation programs expense | 9 | 8 | 32 | 31 |
Selling, general and administrative expenses | ||||
Amounts recognized in the financial statements | ||||
Stock-based compensation programs expense | 43 | 34 | 141 | 130 |
Research, development and related expenses | ||||
Amounts recognized in the financial statements | ||||
Stock-based compensation programs expense | $ 7 | $ 7 | $ 33 | $ 32 |
Stock-Based Compensation - Stoc
Stock-Based Compensation - Stock Options (Details) - Stock Options - USD ($) $ / shares in Units, $ in Millions | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Stock Option Program | ||
Balance at the beginning of the period | 36,196,232 | |
Granted - Annual | 5,409,628 | |
Exercised | (4,667,165) | |
Canceled | (122,880) | |
Balance at the end of the period | 36,815,815 | |
Options exercisable | 26,069,052 | |
Options exercisable, exercise price | $ 107.43 | |
Weighted average exercise price - Beginning balance | 112.07 | |
Weighted average exercise price - Granted - Annual | 175.93 | |
Weighted average exercise price - Exercised | 89.38 | |
Weighted average exercise price - Canceled | 161.12 | |
Weighted average exercise price - Ending balance | $ 124.16 | |
Weighted average remaining contractual life for options outstanding | 75 months | |
Weighted average remaining contractual life for options exercisable | 61 months | |
Aggregate intrinsic value for options outstanding | $ 3,093 | |
Aggregate intrinsic value for options exercisable | $ 2,627 | |
Expiration of annual grants | 10 years | |
Compensation expense yet to be recognized | $ 104 | |
Expense recognition period | 23 months | |
Total intrinsic value of stock options exercised | $ 465 | $ 469 |
Cash received from options exercised | 416 | 534 |
Tax benefit realized from exercise of stock options | $ 158 | $ 173 |
Maximum | ||
Stock Option Program | ||
Vesting period | 3 years | |
Minimum | ||
Stock Option Program | ||
Vesting period | 1 year | |
Annual Stock Option Program | ||
Share- based compensation assumptions | ||
Weighted average exercise price | $ 175.76 | |
Risk-free interest rate (as a percent) | 2.10% | |
Dividend yield (as a percent) | 2.50% | |
Expected volatility (as a percent) | 17.30% | |
Expected life | 78 months | |
Black-Scholes fair value | $ 23.51 |
Stock-Based Compensation - RSU,
Stock-Based Compensation - RSU, RS, Performance Shares (Details) - USD ($) $ / shares in Units, $ in Millions | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Restricted Stock and Restricted Stock Units | ||
Unit and Shares Activity: | ||
Number of Awards - Nonvested - Beginning balance | 2,185,046 | |
Number of Awards - Granted - Annual | 604,256 | |
Number of Awards - Granted - Other | 1,547 | |
Number of Awards - Vested | (758,403) | |
Number of Awards - Forfeited | (31,511) | |
Number of Awards - Nonvested - Ending balance | 2,000,935 | |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Additional Disclosures | ||
Weighted Average Grant Date Fair Value - Nonvested - Beginning balance | $ 145.64 | |
Weighted Average Grant Date Fair Value - Granted - Annual | 176.10 | |
Weighted Average Grant Date Fair Value - Granted - Other | 184.98 | |
Weighted Average Grant Date Fair Value - Vested | 126.75 | |
Weighted Average Grant Date Fair Value - Forfeited | 157.36 | |
Weighted Average Grant Date Fair Value - Nonvested - Ending balance | $ 161.84 | |
Compensation expense yet to be recognized | $ 112 | |
Expense recognition period | 24 months | |
Fair value that vested | $ 134 | $ 136 |
Tax benefit realized from vesting | $ 44 | 51 |
Vesting or performance period | 3 years | |
Value of dividend equivalents for restricted stock units that are forfeited | $ 0 | |
Impact on basic earnings per share due to restricted stock units dividends | $ 0 | |
Performance Shares | ||
Unit and Shares Activity: | ||
Number of Awards - Nonvested - Beginning balance | 656,278 | |
Number of Awards - Granted - Annual | 187,480 | |
Number of Awards - Vested | (312,173) | |
Number of Awards - Performance Change | 65,216 | |
Number of Awards - Forfeited | (9,275) | |
Number of Awards - Nonvested - Ending balance | 587,526 | |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Additional Disclosures | ||
Weighted Average Grant Date Fair Value - Nonvested - Beginning balance | $ 142.98 | |
Weighted Average Grant Date Fair Value - Granted - Annual | 189.81 | |
Weighted Average Grant Date Fair Value - Vested | 124.63 | |
Weighted Average Grant Date Fair Value - Performance Change | 173.25 | |
Weighted Average Grant Date Fair Value - Forfeited | 168.09 | |
Weighted Average Grant Date Fair Value - Nonvested - Ending balance | $ 170.63 | |
Compensation expense yet to be recognized | $ 42 | |
Expense recognition period | 11 months | |
Fair value that vested | $ 55 | 54 |
Tax benefit realized from vesting | $ 15 | $ 15 |
Vesting or performance period | 3 years | |
Performance Shares | Maximum | ||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Additional Disclosures | ||
Expense recognition period | 3 years | |
Number of shares to be delivered based on percent of each performance share granted upon satisfaction of performance conditions | 200.00% | |
Performance Shares | Minimum | ||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Additional Disclosures | ||
Expense recognition period | 1 year | |
Number of shares to be delivered based on percent of each performance share granted upon satisfaction of performance conditions | 0.00% |
Business Segments (Details)
Business Segments (Details) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended |
Mar. 31, 2017division | Jun. 30, 2017segment | Dec. 31, 2016USD ($) | |
Business Segment Information | |||
Number of business segments | segment | 5 | ||
Number of divisions that were combined to create the Automotive and Aerospace Solutions Division | division | 2 | ||
Business Segments | Safety and Graphics | |||
Business Segment Information | |||
Increase (decrease) in net sales due to renewable energy product line segment changes | $ 207 | ||
Increase (decrease) in operating income due to renewable energy product line segment changes | 29 | ||
Business Segments | Electronics and Energy | |||
Business Segment Information | |||
Increase (decrease) in net sales due to renewable energy product line segment changes | (203) | ||
Increase (decrease) in operating income due to renewable energy product line segment changes | (38) | ||
Business Segments | Business Segments in Aggregate | |||
Business Segment Information | |||
Increase (decrease) in net sales due to dual credit reporting change from consolidation of U.S. customer account activity | 163 | ||
Increase (decrease) in operating income due to dual credit reporting change from consolidation of U.S. customer account activity | 36 | ||
Corporate and Unallocated | |||
Business Segment Information | |||
Increase (decrease) in net sales due to renewable energy product line segment changes | (4) | ||
Increase (decrease) in operating income due to renewable energy product line segment changes | 9 | ||
Elimination of Dual Credit | |||
Business Segment Information | |||
Increase (decrease) in net sales due to dual credit reporting change from consolidation of U.S. customer account activity | (163) | ||
Increase (decrease) in operating income due to dual credit reporting change from consolidation of U.S. customer account activity | $ (36) |
Business Segments - Segment inf
Business Segments - Segment information (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 | |
Business Segment Information | |||||
Net sales | $ 7,810 | $ 7,662 | $ 15,495 | $ 15,071 | |
Operating Income | 2,184 | 1,866 | 3,958 | 3,654 | |
Assets | 33,957 | 33,957 | $ 32,906 | ||
Depreciation and amortization | 818 | 722 | |||
Capital expenditures | 589 | 637 | |||
Business Segments | Industrial | |||||
Business Segment Information | |||||
Net sales | 2,720 | 2,654 | 5,429 | 5,253 | |
Operating Income | 523 | 620 | 1,148 | 1,242 | |
Business Segments | Safety and Graphics | |||||
Business Segment Information | |||||
Net sales | 1,547 | 1,561 | 3,074 | 3,038 | |
Operating Income | 852 | 421 | 1,251 | 780 | |
Business Segments | Health Care | |||||
Business Segment Information | |||||
Net sales | 1,440 | 1,414 | 2,863 | 2,805 | |
Operating Income | 412 | 462 | 846 | 919 | |
Business Segments | Electronics and Energy | |||||
Business Segment Information | |||||
Net sales | 1,214 | 1,129 | 2,424 | 2,218 | |
Operating Income | 301 | 217 | 526 | 412 | |
Business Segments | Consumer | |||||
Business Segment Information | |||||
Net sales | 1,137 | 1,130 | 2,179 | 2,180 | |
Operating Income | 195 | 281 | 417 | 519 | |
Corporate and Unallocated | |||||
Business Segment Information | |||||
Net sales | 2 | 3 | 4 | 3 | |
Operating Income | (44) | (84) | (125) | (124) | |
Elimination of Dual Credit | |||||
Business Segment Information | |||||
Net sales | (250) | (229) | (478) | (426) | |
Operating Income | $ (55) | $ (51) | $ (105) | $ (94) |